The high-energy input and thermal history during additive manufacturing lead to complex phase transformations in titanium aluminide alloy. This study mostly focuses on determining the solid-state phase transformation mechanisms during laser deposition and the failure mechanisms of alloys using molecular dynamics simulations. Because of the directional temperature gradient, columnar grains with fully lamellar microstructures are formed first after solidification. A narrow region just below the melting pool is reheated to high temperatures, thus enhancing the precipitation of new equiaxed grains. Multiple thermal cycles in the α + γ phase region promote the formation of massive γ phases (γm) at the grain boundaries. Finally, a nearly lamellar microstructure of alternating columnar and equiaxed grains with γm phases is formed. The deposited titanium aluminide alloy has good room and high-temperature (760 °C) tensile properties of 545 ± 9 and 471 ± 37 MPa, with elongations of 1.50 % ± 0.47 % and 1.50 % ± 0.45 %, respectively. The room and high-temperature samples both fail in the columnar grain region. The molecular dynamics simulations suggest that the interface between α2 and γm is the weakest, especially in the case of semicoherent interfaces (6° angle in the [1–10] direction), which provides good nucleation sites for cracks. Although the equiaxed grain regions contain several γm–α2 interfaces, the samples still fail in the columnar grain regions due to the increase in the cracking distance in the equiaxed regions caused by randomly oriented α2 + γ lamellae and the comparably good plasticity of the γm phases.