Compared with lithographic techniques, mechanical micromachining is a potential competitive process for fabricating 3D micro/meso components or macro parts with micro-features from diverse materials at high accuracy, efficiency, and low costs, but the size effect induced by the comparable size of microstructures, cutting edge radius, and depth-of-cut results in a plowing dominated process. A methodology to incorporate model random microstructure in finite element analysis (FEA) of micromachining multiphase materials has been developed to understand the plowing, tribological, and heat transfer mechanisms. An internal state variable plasticity model has been developed to model the dynamic mechanical behavior including the effect of randomly distributed microstructure, materials damage and evolution. The simulated process variables including chip morphology, forces, and temperatures agree well with the observed experimental phenomena. The simulation recovers the shearing-plowing transition and increased specific energy in micromachining.