Hydrogenated amorphous silicon thin-film transistors (a-Si:H TFTs) are now widely used as elements for active matrix liquid crystal displays. The nanometer-scale multilayered structure of a-Si:H TFTs has been characterized by cross-sectional transmission electron microscopy (TEM). The discrete layer construction of a faulty TFTs and the generation of defects during manufacturing processes have been investigated. A combination of focused ion beam (FIB) etching and cross-sectional TEM leads to a successful failure analysis. A contamination layer with a thickness of 10–30 nm and microvoids inside multilayers are identified in faulty TFTs. An a-Si layer on silicon nitride (SiNx) is crystallized during TEM observation. Electron energy loss spectroscopy analysis indicates that the diffusion of nitrogen into a-Si layer causes the crystallization.