We don’t use the word grace much in Judaism nowadays: “Grace after Meals” feels like an antiquated translation of the last century for bentching. And although words like chen or chesed can be translated as “grace” or “lovingkindness,” we tend to avoid those terms.
The reason the word “grace” seems a bit off may be because it has a rich and contentious Christian history. The theological category of “Divine Grace” is the idea that G-d grants things to people even if they do not deserve them. Grace might mean that even an unrepentant sinner can still receive salvation, as G-d resolves their sins.
Does Judaism have a theological principle of Divine Grace? On the one hand, Hashem grants us many things that are undeserved, as we say at the beginning of bentching: Hashem feeds the world with chen, chesed, and rachamim. But we also believe that, at some level, people have free will and receive what they deserve, which is in tension with a concept of grace.
We see a manifestation of this tension in a debate in the Gemara (Yoma 85a) as to whether the day of Yom Kippur atones for our sins on its own, or only if we do teshuvah. What seems to be at issue is whether this most important day of atonement is based on human free will and transformation or a day of pure grace.