The evolution of microstructures and grain orientations of a Pb-free solder interconnect during thermal cycling significantly affects its mechanical properties and failure modes. Thus, Sn-3.0Ag-0.5Cu ball grid array assemblies were subjected to thermal cycling to study the thermomechanical responses of the solder interconnects. The orientations and microstructures of the solder interconnects were studied by optical microscopy with cross-polarized light and scanning electron microscopy with an electron backscattered diffraction analysis system. Localized recrystallization behavior was observed in Pb-free solder interconnects during thermal cycling. Closer examination of the very early stage of recrystallization in the same solder interconnect revealed that the subgrains appeared before the formation of the recrystallized grains, and the orientations of the small recrystallized grains separated by high-angle grain boundaries evolved from the initial orientations by subgrain rotation. The localized recrystallization produced fine-grained microstructures during thermal cycling, providing an additional deformation mechanism for the solder interconnects, i.e., grain boundary sliding, which would have been impossible prior to recrystallization. The grain orientation has a strong effect on damage generation and the subsequent failure mode; initiation and propagation of cracks could be facilitated by the intrinsic anisotropic thermomechanical responses of the differently oriented grains, leading to a change in the crack propagation path and corresponding failure mode.