In applications involving fretting wear damage, surfaces with high yield strength and wear resistance are required. In this study, the mechanical responses of materials with graded nanostructured surfaces during fretting sliding are investigated and compared to homogeneous materials through a systematic computational study. A three-dimensional finite element model is developed to characterize the fretting sliding characteristics and shakedown behavior with varying degrees of contact friction and gradient layer thicknesses. Results obtained using a representative model material (i.e., 304 stainless steel) demonstrate that metallic materials with a graded nanostructured surface could exhibit a more than 80% reduction in plastically deformed surface areas and volumes, resulting in superior fretting damage resistance in comparison to homogeneous coarse-grained metals. In particular, a graded nanostructured material can exhibit elastic or plastic shakedown, depending on the contact friction coefficient. Optimal fretting resistance can be achieved for the graded nanostructured material by decreasing the friction coefficient (e.g., from 0.6 to 0.4 in 304 stainless steel), resulting in an elastic shakedown behavior, where the plastically deformed volume and area exhibit zero increment in the accumulated plastic strain during further sliding. These findings in the graded nanostructured materials using 304 stainless steel as a model system can be further tailored for engineering optimal fretting damage resistance.