In this paper, an ice floe inner stress caused by the wave-induced bending moment is derived to estimate the stress failure of ice floe. The strain and stress failures are combined to establish a wave-induced ice yield scheme. We added ice stress and strain failure module in the Finite-Volume Community Ocean Model (FVCOM), which already includes module of ice-induced wave attenuation. Thus a fully coupled wave-ice dynamical interaction model is established based on the ice and wave modules of FVCOM. This model is applied to reproduce the ice and wave fields of the breakup events observed during the second Sea Ice Physics and Ecosystem Experiment (SIPEX-2) voyage. The simulation results show that by adopting the combined wave-induced ice yield scheme, the model can successfully predict the ice breakup events, which the strain failure model is unable to predict. By comparing the critical significant wave height deduced from strain and stress failure schemes, it is concluded that the ice breakup is caused by the strain failure when wave periods are shorter than a threshold value, while the stress failure is the main reason for the ice breakup when wave periods are longer than the threshold value. Neglecting either of these two ice-break inducement mechanisms could overestimate the ice floe size, and thus underestimate the velocity of the ice lateral melt and increase the error of simulation of polar ice extent.