Studies on U-notched bend specimens of spheroidized AISI 1090 steel revealed that plastic instability initiated as a surface roughening in the notch root. The surface waviness preceded subsurface void formation and appeared at a strain in fair agreement with predictions from plasticity theory. With increasing plastic strain, surface microcracks, bulk instabilities in the form of shear localization along characteristic slip traces, and bulk microcracks along these traces appeared. Along with macrocracks, profuse void formation occurred along the slip traces in advance of the crack front. The results are analyzed on the basis of the shear bifurcation plasticity analysis for the case where a vertex appears on the yield surface.