Under the surface peeling of Cu-Fe-P lead frame alloy larger Fe particles were observed by energy dispersive spectroscopy. By using the large strain two-dimension plane strain model and elastic-plastic finite element method, the cause for peeling damage of Cu-Fe-P lead frame alloy was investigated. The results show that when the content of Fe particles is more than 30% at local Fe-rich area the intense stress concentration in the Fe particle would make the Fe particle broken up. The high equivalent stress mutation and the mismatch of equivalent strain 10% at the two sides of interface make it easy to develop the crack and peeling damage on finish rolling. The larger Fe particles in the Cu-Fe-P alloy should be avoided.