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This paper presents the investigation on detection of strain localization in experimental research and numerical simulation of sheet metal forming. Experimental tests and numerical simulations of the Nakazima test have been performed for the DC04 grade steel sheet. The onset of localized necking has been determined using the criterion based on analysis of the major principal strain and its first and second time derivatives in the most strained zone. The strain localization has been evaluated by the maximum of strain acceleration which corresponds to the inflection point of the strain velocity vs. time. The limit strains have been calculated numerically and experimentally for specimens undergoing deformation at different strain paths. It has been shown that the numerical model predicts formability limits close to the experimental results. Analyzed criterion can be used as a potential alternative tool to determine formability in standard finite element simulations of sheet forming processes.