A three-dimensional atomistic-based process zone model (APZM) is used to simulate high-speed impact induced dynamic fracture process such as fragmentation and spall fracture. This multiscale simulation model combines the Cauchy–Born rule, colloidal crystal process model, and micromechanics homogenization technique to construct constitutive relations in both grains and grain boundary at mesoscale. The proposed APZM has some inherent advantages to describe mechanical behaviors of polycrystalline solids. First, in contrast to macroscale phenomenological constitutive models, the APZM takes into account atomistic binding energy and atomistic lattice structure. In particular, the electron density related embedded atom method (EAM) potential has been adopted to describe interatomistic interactions of metallic polycrystalline solids in bulk elements; second, a mixed type of EAM potential and colloidal crystal depletion potential is constructed to describe heterogeneous microstructure in the process zone; third, the atomistic potential in both bulk material and process zone has the same atomistic origin, and hence, the bulk and process potentials are self-consistent. The simulation of dynamic fracture process of a cylinder made of aluminum powder metallurgy (P/M) alloy during high-speed impact/penetration is carried out, and numerical results demonstrate that APZM finite element method has remarkable ability to accurately capture complex three-dimensional fragmentation formation and damage morphology. Copyright © 2012 John Wiley & Sons, Ltd.