Plasticity induced damage development in metals is anisotropic by nature. The anisotropy in damage is driven by two different phenomena; anisotropic deformation state i.e. Load Induced Anisotropic Damage (LIAD) and anisotropic microstructure i.e. Material Induced Anisotropic Damage (MIAD). The contribution of second phase particles can be anisotropic in terms of shape as well as distribution. Most of the continuum anisotropic damage models mimic the phenomenon of LIAD only. Not much attention has been paid to MIAD. This work shows the existence of MIAD in a (pre-production) grade of dual phase steel (DP600). The aim is to see the influence of MIAD on post localization deformation behavior and final failure mode. The deformation in this material is almost isotropic up to localization but the post localization deformation and final failure mode is different when loaded in 0◦ and 90◦ to rolling direction. Tensile specimens were deformed up to final failure. A few specimens were stopped just before the final failure. Scanning electron microscopic analysis was carried out to study martensite morphology and damage in these specimens. The martensite morphology showed anisotropy in shape and orientation in the undeformed specimens. Significant MIAD was observed in the deformed tensile specimens due to the anisotropic martensite morphology. MIAD explains direction dependent post localization deformation, final failure mode and formability of this material. Lemaitre’s anisotropic damage model is modified to account for MIAD in a phenomenological manner. The MIAD parameters were determined from tensile tests carried out in 0◦ 45◦ and 90◦ to the rolling direction.