This research investigates the modeling of randomly distributed surface-breaking microcracks and their effects on higher harmonic generation in Rayleigh surface waves. The modeling is based on micromechanical considerations of rough surface contact. The nonlinear behavior of a single microcrack is described by a hyperelastic effective stress-strain relationship. Finite element simulations of nonlinear wave propagation in a solid with distributed microcracks are performed. The evolution of fundamental and second harmonic amplitudes along the propagation distance is studied and the acoustic nonlinearity parameter is calculated. The results show that the nonlinearity parameter increases with crack density and root mean square roughness of the crack faces. While, for a dilute concentration of microcracks, the increase in acoustic nonlinearity is proportional to the crack density, this is not valid for higher crack densities, as the microcracks start to interact. Finally, it is shown that odd higher harmonic generation in Rayleigh surface waves due to sliding crack faces introduces a friction nonlinearity.