Fluid-rock interactions play a critical role in Earth’s lithosphere and environmental subsurface systems. In the absence of chemical mass transport, mineral-hydration reactions would be accompanied by a solid-volume increase that may induce differential stresses and associated reaction-induced deformation processes, such as dilatant fracturing to increase fluid permeability. However, the magnitudes of stresses that manifest in natural systems remain poorly constrained. We used optical and electron microscopy to show that one of the simplest hydration reactions in nature [MgO + H2O = Mg(OH)2] can induce stresses of several hundred megapascals, with local stresses of as much as ∼1.5 GPa. We demonstrate that these stresses not only cause fracturing but also induce plastic deformation with dislocation densities (1015 m−2) exceeding those typical of tectonically deformed rocks. If these reaction-induced stresses can be transmitted across larger length scales, they may influence the bulk stress state of reacting regions. Moreover, the structural damage induced may be the first step toward catastrophic rock failure, triggering crustal seismicity.