Grinding burn is an undesired defect in gear machining, and a white layer is an indication of severe burn that is detrimental to gear surface performance. In this work, the influence of grinding parameters on the thickness of the white layer during form grinding of quenched transmission gear was investigated, and the microstructure evolution and mechanism of severe burn formation were analyzed. The grinding temperature increased with the grinding depth and grinding speed, with the highest level of ~290 °C. The thickness of the white layer exceeded 100 μm when the grinding depth was 0.03 mm, and the top layer was a plastic deformation layer followed by a fine-grained martensite layer. Coarse-grained acicular martensite was found at the interface between the white layer and softened dark layer. The mechanical effect and thermal softening mainly contributed to the formation of white layer stratification. The ground surface topography showed several scratches and typical grooves; when grinding depth increased to 0.03 mm, the grinding surface roughness Sa was relatively high and reached up to ~0.60 μm, mainly owing to severe plastic deformation under grinding wheel extrusion and the thermal effect.