Fatigue limit estimation based on the dissipated energy measurement using infrared thermography has been getting an increasing attention in various industries. In this study, mechanism of energy dissipation is investigated in relation with formulation of slip bands for JIS type 316L stainless steel through observation of slip bands by optical microscope and atomic force microscope. It was found that the energy dissipation was related to activity of slip band and estimated fatigue limit is corresponding to crack initiation stress level of the material. Phase information of energy dissipation was investigated and was applied to the accuracy improvement of dissipated energy measurement for fatigue damage estimation.