In order to clarify the mechanism of fatigue life enhancement of IN718 alloy strengthened by laser peening (LP), the relationship between the grain rearrangement and fatigue property of the alloy before and after LP is studied. The results show that, after LP, the maximum plastic deforming depth of sample surface reaches 33.7 μm, and the maximum fatigue life enhancement of the alloy reaches 188%. With the increase of laser power density, the surface residual compressive stress induced by laser shock wave increases, but the amplification decreases gradually. After the fatigue test, the release of the surface residual stress of 52% appears. The grain refinement phenomenon is found on the sample surface after LP, and the refining depth reaches 175 μm. The interaction among the dislocation sliding, dislocation climbing and twin crystal results in the generation of subgrains, and eventually the grain structure is refined.