The development of a localized damage zone or shear band in rock was studied through numerical and physical experiments. A laboratory biaxial (plane strain) compression test was conducted on a prismatic specimen of Berea sandstone. The shear band initiation and propagation were monitored by locations of acoustic emission and examination of thin sections of the failed specimen. Numerical analysis using a discrete element model was conducted to simulate the laboratory results. The model was able to capture many details of the damage zone observed in the physical experiment.