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Multi-phase microstructures with high mechanical contrast phases are prone to microscopic damage mechanisms. For ferrite–martensite dual-phase steel, for example, damage mechanisms such as martensite cracking or martensite–ferrite decohesion are activated with deformation, and discussed often in literature in relation to their detrimental role in triggering early failure in specific dual-phase steel grades. However, both the micromechanical processes involved and their direct influence on the macroscopic behavior are quite complex, and a deeper understanding thereof requires systematic analyses. To this end, an experimental–theoretical approach is employed here, focusing on three model dual-phase steel microstructures each deformed in three different strain paths. The micromechanical role of the observed damage mechanisms is investigated in detail by in-situ scanning electron microscopy tests, quantitative damage analyses, and finite element simulations. The comparative analysis reveals the unforeseen conclusion that damage nucleation may have a beneficial mechanical effect in ideally designed dual-phase steel microstructures (with effective crack-arrest mechanisms) through microscopic strain delocalization.