In recent years, application of PEEK bearing for use in special environments such as equipment of chemical fluid transportation is expected. However, the fatigue crack propagation on the PEEK bearing with PEEK/graphite film under rolling contact in the condition of the low-viscosity fluid with gas is not well known. To clarify propagation of fatigue cracks on the inner ring raceway surface with PEEK/graphite film under the water and dry environmental repeated conditions, we performed the rolling contact tests using radial PEEK hybrid ball bearings. As a result, when the rolling contact fatigue test condition was 1200 min−1 rotation speed and 123 N applied load, the fatigue crack occurred on the bearing’s inner ring raceway surface after 5.00 × 105 fatigue cycles. We found that the fatigue crack during underwater testing propagated more than that of dry testing. Next, we made the cross-section samples of the bearing’s inner ring raceway at 1.00 × 106 fatigue cycles for investigation in early stage of flaking as fatigue fracture process. The internal fatigue crack which was at 280 μm maximum depth from the inner ring raceway surface propagated in the subsurface of the raceway center position. While the internal fatigue crack propagated toward the bearing’s rolling direction and axial direction in the subsurface of the raceway, the shape of the internal fatigue crack propagation was hemisphere-like shape.