Currently, wire bonding is the most popular first-level interconnection technology used between the die and package terminals, but even with its long-term and excessive usage, the mechanism of wire bonding has not been completely evaluated. Therefore, fundamental research is still needed. In this study, the mechanism of microweld formation and breakage during Cu–Cu wire bonding was investigated by using molecular dynamics simulation. The contact model for the nanoindentation process between the wire and substrate was developed to simulate the contact process of the Cu wire and Cu substrate. Elastic contact and plastic instability were investigated through the loading and unloading processes. Moreover,the evolution of the indentation morphology and distributions of the atomic stress were also investigated. It was shown that the loading and unloading curves do not coincide, and the unloading curve exhibited hysteresis. For the substrate, in the loading process, the main force changed from attractive to repulsive. The maximum von Mises stress increased and shifted from the center toward the edge of the contact area. During the unloading process, the main force changed from repulsive to attractive. The Mises stress reduced first and then increased. Stress concentration occurs around dislocations inthe middle area of the Cu wire.