We study the instability of a dusty simple shear flow where the dust particles are distributed non-uniformly. A simple shear flow is modally stable to infinitesimal perturbations. Also, a band of particles remains unaffected in the absence of any background flow. However, we demonstrate that the combined scenario – comprising a simple shear flow with a localized band of particles – can exhibit destabilization due to their two-way interaction. The instability originates solely from the momentum feedback from the particle phase to the fluid phase. Eulerian–Lagrangian simulations are employed to illustrate the existence of this instability. Furthermore, the results are compared with a linear stability analysis of the system using an Eulerian–Eulerian model. Our findings indicate that the instability has an inviscid origin and is characterized by a critical wavelength below which it is not persistent. We have observed that increasing particle inertia dampens the unstable modes, whereas the strength of the instability increases with the strength of the coupling between the fluid and particle phases.