This paper contributes to the physical understanding of sheet metal micro-mechanics by addressing the influence of damage evolution on localization and eventually ductile fracture in different strain paths. For this purpose, two steels of different microstructure are deformed in different strain paths, along which forming and fracture limit curves are measured. Microstructural damage mechanisms are characterized and compared for different strain paths (i.e. uniaxial, plane strain and biaxial tension) and at different stages of deformation (i.e. before localization, after localization and at fracture). Interesting results are obtained revealing generic relationships between microstructure evolution (e.g. damage accumulation), localization (forming limit curve) and fracture (fracture limit curve). For single phase microstructures with limited damage sources, damage is initiated as a result of a developing plastic instability (localization), and therefore does not have a significant role on the forming limits. For microstructures with more damage mechanisms, however, the damage accumulates even before localization, and significantly affects both necking and fracture limits. © 2009 Elsevier Ltd. All rights reserved.