Flow phenomena and mechanisms involved in cavitation breakdown, namely, a severe degradation of pump performance caused by cavitation, have been a longstanding puzzle. In this paper, results of high-speed imaging as well as pressure and performance measurements are used to elucidate the specific mechanism involved with cavitation breakdown within an axial waterjet pump. The experiments have been performed using geometrically identical aluminum and transparent acrylic rotors, the latter allowing uninhibited visual access to the cavitation phenomena within the blade passage. The observations demonstrate that interaction between the tip leakage vortex (TLV) and trailing edge of the attached cavitation near the rotor blade tip that covers the suction side (SS) of the blade plays a key role in processes leading to breakdown. In particular, the vortical cloud cavitation developing at the trailing edge of the sheet cavity near the blade tip is entrained and re-oriented by the TLV in a direction that is nearly perpendicular to the blade SS surface, and then convected downstream through the blade passage. Well above breakdown cavitation indices, these “perpendicular cavitating vortices” or PCVs occur in the region where blades do not overlap, and they only affect the local flow complexity with minimal impact on the global pump performance. With decreasing pressure and growing sheet cavitation coverage of the blade surface, this interaction occurs in the region where two adjacent rotor blades overlap, and the PCV extends from the SS surface of the originating blade to the pressure side (PS) of the neighboring blade. Cavitation breakdown begins when the PCV extends between blades, effectively blocking the tip region of the rotor passage. With further decrease in pressure, the PCVs grow in size and strength, and extend deeper into the passage, causing rapid degradation in performance. Accordingly, the casing pressure measurements confirm that attachment of the PCV to the PS of the blade causes rapid decrease in the pressure difference across this blade, i.e., a rapid decrease in blade loading near the tip. Similar large perpendicular vortical structures have been observed in the heavily loaded cavitating rocket inducers (Acosta, 1958, “An Experimental Study of Cavitating Inducers,” Proceedings of the Second Symposium on Naval Hydrodynamics, ONR/ACR-38, pp. 537–557 and Tsujimoto, 2007, “Tip Leakage and Backflow Vortex Cavitation,” Fluid Dynamics of Cavitation and Cavitating Turbopumps, L. d'Agostino and M. Salvetti, eds., Springer, Vienna, Austria, pp. 231–251), where they extend far upstream of the rotor and cause global flow instabilities.