Abstract To investigate the influence of microstructural heterogeneity on rock deformation and failure mechanisms, this study first analyzes the mineral composition of mudstone and obtains its mechanical parameters through laboratory testing. Subsequently, establishing a particle flow code-grain based model (PFC-GBM) to simulate the microstructure of mudstone, calibrated with experimental parameters. The influences of the proportion of clay minerals, and mineral crystal size on crack evolution and crack distribution during mudstone failure are investigated. The results demonstrate that: (1) Clay mineral crystals experience initial damage during mudstone failure, followed by relative movement between mineral crystals, leading to a significant number of cracks. Shear failure dominates the process, with shear cracks and intercrystalline cracks accounting for 61.3% and 52.7% of total cracks, respectively. (2) With an increase in the proportion of clay mineral crystals, both peak strength and damage strength of mudstone decrease, with peak strength dropping from 11.95 MPa to 9.13 MPa. Furthermore, the location of crack generation shifts from the center towards the two ends of the sample post-failure. (3) The size of the mineral crystals in mudstone primarily influences the generation of intercrystalline cracks. As the mineral crystal size decreases, cracks in the mudstone gradually propagate toward the center of the mudstone after failure, with intercrystalline cracks increasing from 25.3 to 51.5%. This study primarily simulates microstructural evolution at the mineral crystal scale in heterogeneous soft rocks, providing deeper insights into the deformation and failure characteristics of soft rocks. The findings offer valuable reference points for understanding the stability of soft rock slopes.