Nucleation of fatigue cracks at nonmetallic primary inclusions in high cycle fatigue of martensitic steel is computationally investigated. We explore the capabilities of an elastic interphase material adhered to the inclusion surface to alter the driving force for fatigue crack nucleation in the matrix. By varying the elastic stiffness of the encapsulating interphase, the stresses and cyclic plastic strains are examined in the matrix in the proximity of a partially debonded inclusion, a worst case scenario for nucleation. The matrix is modeled as elastic-plastic with pure kinematic hardening expressed in a hardening minus dynamic recovery format. The inclusion and interphase are modeled as isotropic linear elastic. An idealized spherical, homogeneous inclusion is considered to facilitate parametric study. A nonlocal average value of the maximum plastic shear strain amplitude was used in a modified form of the Fatemi–Socie parameter in the proximity of inclusions as a fatigue indicator parameter to facilitate comparative parametric study of potency for crack nucleation.