Stress-induced failure is a critical concern that influences the mechanical reliability of an indium tin oxide (ITO) film deposited on a transparently flexible polyethylene terephthalate (PET) substrate. In this study, a cycling bending mechanism was proposed and used to experimentally investigate the influences of compressive and tensile stresses on the mechanical stability of an ITO film deposited on PET substrates. The sheet resistance of the ITO film, optical transmittance of the ITO-coated PET substrates, and failure scheme within the ITO film were measured to evaluate the mechanical stability of the concerned thin films. The results indicated that compressive and tensile stresses generated distinct failure schemes within an ITO film and both led to increased sheet resistance and optical transmittance. In addition, tensile stress increased the sheet resistance of an ITO film more easily than compressive stress did. However, the influences of both compressive and tensile stress on increased optical transmittance were demonstrated to be highly similar. Increasing the thickness of a PET substrate resulted in increased sheet resistance and optical transmittance regardless of the presence of compressive or tensile stress. Moreover, J-Integral, a method based on strain energy, was used to estimate the interfacial adhesion strength of the ITO-PET film through the simulation approach enabled by a finite element analysis.