Fracture toughness and mechanical properties of the zircaloy-2 processed by rolling at different temperatures have been investigated, and simulations have been performed using extended finite element method (XFEM). The solutionized alloy was rolled at different temperatures for different thickness reductions (25–85%). Fracture toughness has been investigated by compact tension test. The improved fracture toughness of the rolled zircaloy-2 samples is due to high dislocation density. SEM image of the fractured surface shows the reduction in dimple sizes with the increase in dislocation density due to the formation of microvoids as a result of severe strain induced during rolling. Compact tension test, edge crack, center crack and three-point bend specimen simulations have been performed by XFEM. In XFEM, the cracks are not a part of finite element mesh and are modeled by adding enrichment function in the standard finite element displacement approximation. The XFEM results obtained for compact tension test have been found to be in good agreement with the experiment. © 2016, ASM International.