Hard turning has begun to compete with grinding in manufacturing various mechanical components because of the significant potential technical and economical benefits for improving fatigue life. However under certain cutting conditions, a phase-transformed white layer (WL) may form on the machined surface that could drastically affect a component’s service life. The presence of WL causes great concerns in machining industry just because the WL effects on component performance such as fatigue life are yet to be understood. Therefore the significant benefits of hard turning would not be realized fully unless this issue is solved. A novel real-time acoustic emission (AE) based rolling contact fatigue (RCF) testing system was presented to study the WL effects on component life. AISI 52100 bearing steels were machined to generate two distinct surfaces: free of white layer (NOWL) and with WL. The real life loading of contact pressures and rolling speeds was applied to the test specimens. The applied load throughout the experiment was in-process monitored using a load cell which enabling the record of a Hertzian pressure history during rolling contact. It was found that the RCF testing system is simple and inexpensive, but very sensitive to fatigue crack initiation and propagation. Compared with AE count rate, AE parameters such as energy, RMS, and amplitude are more sensitive to fatigue crack initiation and propagation in rolling contact. The NOWL samples are more resistive to fatigue crack initiation/propagation and therefore have a longer life when compared to the WL samples with equivalent surface finish. The WL samples have shorter life or at most comparable with the NOWL samples with relative rough surface finish.