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Abstract A key challenge in metallic alloys with high ductility is understanding how microstructural inhomogeneities influence shear localization, leading to localized plastic deformation and material failure. In this study, we explore the phenomenon of shear localization in coarse-grained copper, a material traditionally regarded as having low susceptibility to such behavior. Contrary to conventional understanding, our findings reveal that microstructural inhomogeneities play a pivotal role in inducing extensive strain localization during low strain rate micro-mechanical loading. The presence of fine precipitate particles leads to strain localization at small strains and low strain rates by activating shear localization driven by void formation mechanisms. Furthermore, nanoscale precipitates act as sites for dislocation pile-up within deformed structures of shear bands, leading to the formation of nano twins within these bands. Consequently, precipitate particles serve a dual role: contributing to strain localization and potential cracking, while also enhancing the alloy’s strength and ductility through nano-twinning mechanisms. This investigation offers a novel perspective on the interplay between material microstructure and deformation behavior, challenging existing paradigms in materials science.