The mechanism for scratch-induced demagnetization was studied in perpendicular magnetic recording (PMR) disks. Scratches, which may occur on a disk's surface during head/disk contact, cause demagnetization, which results in read/write errors. Scratch-induced demagnetization is thus a serious issue. Scratch depths and demagnetization were compared using prototype PMR disks. We confirmed that demagnetization due to scratch depths were different because of the disk structures such as the cap and granular layers through observation using atomic force and magnetic force microscopy. We found that crystal planes in the grains of the granular layer slipped under the scratches, where demagnetization was observed from transmission electronic microscopy cross-sectional analyses of those disks. Scratch-induced demagnetization was mainly caused by plastic deformation of the grain due to crystal plane slippage in the granular layer. Therefore, a grain structure that is dense and cannot easily slip is needed to produce reliable hard disk drives.