A detailed analysis of microstructure and failure mechanism of a dual phase steel material as a function of strain was conducted. Accordingly, three tensile tests were performed and interrupted at different strain levels in order to investigate the void nucleation, void growth and void coalescence. SEM analysis revealed that voids nucleation occurs by ferrite grain-boundary decohesion in the neighborhood of martensite grains. Further, void initiation could be observed between closely sited martensite grains. Martensite morphology and distribution has a significant impact on the accumulation of damage. The mechanism of failure was found to be influenced by deformation localization due to microstructural inhomogenity. Based on the experimental observations and simulation results, A model describing the failure mechanism is proposed for dual phase steel material. Keywords: Dual Phase (DP) Steel, Failure Mechanism, Tensile Test, Void initiation, Martensite shape effect.