White etching layers (WELs) are one of the main causes of rail surface degradation, which play the important roles on the contact mechanism and tribology behaviours at wheel and rail interface. An electrical arcing due to current leakage was investigated as a new potential source of thermally induced WELs. Both electrical arcing induced WELs and ex-service WELs comprise similar microstructures, consisting of a predominate polycrystalline martensite phase along with a minor retained austenite phase. Brown etching layers were observed as parallel to the WELs, and their formation was attributed to a concurrent tempering process. The correspondence between the simulated WELs and ex-service WELs evidences that arcing due to electrical current leaking represents an alternative formation mechanism for thermally induced WELs.