The aim of this study is to explore the internal damage mechanisms of AlSi12 metal matrix syntactic foam (MMSF) with embedded ceramic hollow spheres (CHSs) to understand the damage behavior during compressive loading. To achieve this goal, in situ synchrotron X-ray tomography is used. A qualitative and quantitative assessment of the initiation and gradual collapse of matrix, filler material, and pores is presented. The imaging-based investigation provided detailed visualization and tracking of failure mechanisms of the MMSF, with emphasis on the collapse of hollow spheres at the microstructural level. The structural parameters describing performance limits are experimentally determined and correlated with internal mechanisms. It is concluded that a homogeneous distribution of the second-phase filler material results in a sequential collapse in a localized region; this leads to controlled and predictable energy absorption. The CHSs rupture is found to be location dependent within the localized shear band region, with spheres of all diameters failing to a similar extent. The results from this work can be used to train or validate predictive models of MMSFs deformed under compressive loading conditions by correlating the 3D damage progression with the overall mechanical response.