Although many studies have reported the behaviors of thermal cycling of Sn-based solder joints, the corresponding mechanism is difficult to describe universally due to the complexity of different cases. In the present study, microstructural evolution and failure of Sn–Bi57–Ag0.7 solder joints caused by thermal cycling between − 40 and 85 °C from 0 to 1000 cycles were systematically investigated. The results indicated that the Sn–Bi–Ag solder joint was composed of Sn-rich phase, Bi-rich phase, large numbers of Bi dispersed-particles, and Ag 3 Sn precipitate. With the extension of time during thermal cycling, the microstructure of Sn–Bi–Ag solder joint gradually coarsened and the IMC layer became thicker (from 0.82 to 2.38 μm). However, Sn–Bi–Ag solder joints failed after 3000 thermal cycles. Two different stages of failure were found and the mechanism, related to the increment of thermal mismatch stress, was illuminated. Furthermore, Electron Backscattered Diffraction was used to detailedly elucidate the grain characteristics of the failed Sn–Bi–Ag solder joints, and the effect of thermal stress on orientations of Sn and Bi grains was also revealed. Being different from the orientation change observed in traditional Sn–Bi eutectic solder joints in previous studies, the present results demonstrated that both Sn and Bi grains did not present any preferred orientations after thermal cycling. And the reason of this phenomenon might be attributed to the Ag 3 Sn, which could be regarded as second-phase particles. Our present work would provide theoretical guidance for the development of new Sn–Bi-X solders with high reliabilities.