Several recent studies reported high ductility in the Ti–O alloy, which is believed to be brittle, but the mechanism explaining the ductility has not yet been clarified. This study focused on the relationship between grain size and ductility to elucidate the mechanism for the high ductility in the Ti–O alloy and found that the ductility decreased with an increasing grain size. Although the extrudate of a Ti-0.77 wt%O sintered alloy exhibited good ductility (>5%) up to a grain size of 49.8 μm, the alloy failed in the elastic area when the grain size exceeded 98.4 μm. Cracks with a size similar to the grain size were observed at the grain boundaries in the fracture area of these ductile fine-grain Ti–O alloys. In situ observations of the deformation behavior of the fine-grain Ti–O alloy revealed that crack propagation was suppressed due to the reduced stress intensity caused by crack refinement. In contrast, in the large-grain Ti–O alloy, the high stress intensity around the first crack caused immediate crack propagation and brittleness.