Cadmium telluride (CdTe) is known as an important semiconductor material with favorable physical properties. However, as a soft-brittle material, the fabrication of high-quality surfaces on CdTe is quite challenging. To improve the fundamental understanding of the nanoscale deformation mechanisms of CdTe, in this paper, MD simulation was performed to explore the nano-grinding process of CdTe with consideration of the effects of grain size and grinding depth. The simulation results indicate that during nano-grinding, the dominant grinding mechanism could switch from elastic deformation to ploughing, and then cutting as the grinding depth increases. It was observed that the critical relative grain sharpness (RGS) for the transition from ploughing to cutting is greatly influenced by the grain size. Furthermore, as the grinding depth increases, the dominant subsurface damage mechanism could switch from surface friction into slip motion along the <110> directions. Meanwhile, as the grain size increases, less friction-induced damage is generated in the subsurface workpiece, and more dislocations are formed near the machined groove. Moreover, regardless of the grain size, it was observed that the generation of dislocation is more apparent as the dominant grinding mechanism becomes ploughing and cutting.