The working and damage mechanisms of intraocular Nd: YAG laser surgery and their respective damage ranges were investigated in vitro using bovine cornea specimens as a model tissue. The main mechanisms are plasma formation and expansion, emission of acoustic transients, and cavitation with jet formation. When a sequence of laser pulses is applied, the interaction of the acoustic transients with gas bubbles remaining from preceding laser exposures is also important. To distinguish the effects caused by the different physical mechanisms, laser pulses were aimed directly onto the corneal endothelium, through the cornea, and parallel to the cornea at various distances. Simultaneously, the cavitation bubble size was determined. The surface morphology and sections of the same lesions were studied by light and electron microscopy. The primary surgical mechanism is tissue evaporation by the laser plasma, whereas the collateral damage from single laser pulses is mainly caused by the cavitation and jet formation. The damage range after a 4 mJ laser pulse is 0.8 mm, which is slightly larger than the corresponding cavitation bubble radius. The damage range of the acoustic transients produced by a 4 mJ laser pulse is several millimeters, when they can interact with small gas bubbles attached to the corneal endothelium. The damage range of the acoustic transients alone is smaller than that of cavitation as far as damage detected by light and scanning electron microscopy is concerned. However, on a subcellular level the acoustic transients may possibly cause damage up to a much larger distance. The damage range observed varies with the cube root of the laser pulse energy. A reduction of collateral effects therefore requires the use of small pulse energies. For energies of less than 1 mJ, the pulse duration has to be reduced to ensure plasma production. It is proposed to use low-energy picosecond pulses with moderate repetition rate instead of single nanosecond pulses to reduce collateral damage effects.