Thin films have become technologically important in recent years. The mechanical properties of a thin film affect its mechanical behavior and may lead to problems such as surface cracking, debonding and buckling. In the literature, nanoindentation tests have been carried out to measure elastic properties and to check performance against wear. In this work, the fracture mechanics approach is applied to find the optimal material combination for multilayer thin films, which can improve the performance against propagation of surface cracks. A stress intensity factor is an important parameter in fracture mechanics, which is used to predict failure of thin films in this study. Finite element method is used to model these thin film configurations. Stress intensity factors are evaluated using displacement extrapolation technique.For multilayer films two material variations are studied, one has a cosine pattern while other has a step function pattern in thickness direction. It is found that increasing the number of material variation cycles in multilayer configurations can help to slow the propagation of smaller surface cracks. Both material variations in multilayer films gave similar performance. To choose optimal material, overall performance of multilayer system is obtained. Equations are formed to predict performance within tested range of parameters. Reverse analysis is then performed to find the optimal material. Analysis yielded a combination, which has a hard material of Young’s modulus 1000 MPa at the top becoming soft linearly to a material of Young’s modulus 800 MPa in contact with the substrate of Young’s modulus 500 MPa, suggesting the use of functionally graded materials for better resistance to surface crack propagations.