Micro-scaled progressive sheet metal forming is a promising process for producing bulk microparts, given itsadvantages of high efficiency and low cost. To enhance forming quality andefficiency, it is important to have an in-depth understanding of the forming mechanism andmodel the forming process and fracture behavior accurately. However, prediction of fracture formation in sheet materials at the micro scale has not yet been well explored, and thus current knowledgeis not sufficient to support the continued development and application of microforming technology. This study investigated progressive sheet forming of magnesium–lithium alloy sheets of different grain sizes to produce bulk microparts directly from sheet metal via shearing, extruding, piercing, and blanking. Using the Gurson–Tvergaard–Needleman (GTN) damage model, the effects of the size factor on the formation and evolution of voids were considered, and the shear-modified GTN model was established by combining Thomason’s and Lemaitre's damage mechanics models. The modified model could predict not only the ductile fracture behavior dominated by tension under high stress triaxiality at the micro scale, but also the damage behavior controlled by shear deformation under low stress triaxiality. The progressive forming process was simulated using the modified model, which was verified by experimentation and simulation. Comparisons of the experiments and simulations revealed the size effects on the forming defects and fracture behaviors of microparts during progressive sheet forming. The results show that the stress during deformation is mainly concentrated at the edge of mircoparts, and irregular geometric defects include burr, rollover, incline, and bulge become deteriorated with the increase of the initial grain size. This study enhances the understanding and prediction of ductile fracture in the micro-scaled progressive forming of sheet metals.