Understanding the mechanisms of strain localization is the key to our understanding of the transition from steady-state flow to unstable flow in the middle crust. In this paper, studies on deformation of gneisses sheared at mid-crustal level along the Jinzhou detachment fault zone, Liaodong peninsula, North China, reveal that biotite grains, as pre-existing weak-phase, have important influences on deformation of middle-crustal rocks. High phase strength contrasts between biotite grains and other mineral phases resulted in stress concentrations during shearing and occurrences of microcracks at the tips of biotite grains. Consequently, microcracks are formed either along contacts between high strength mineral grains or propagate into the mineral grains. The microcracks filled with biotite grains and fine-grained feldspar aggregates continue to nucleate, propagate, and coalesce in the rocks, while basal plane slip and grain boundary sliding (GBS) operate in biotite grains and fine-grained feldspar aggregates, respectively. These processes lead to a transition from load-bearing framework (i.e., coarse plagioclase grains) to interconnected weak phase (i.e., biotite grains and fine-grained feldspar aggregates), and the formation of incipient strain localization zones (SLZs). With the propagation and linkage of the SLZs, high stress concentrations at the tips of SLZs lead to nucleation of fractures. At the same time, there occurs an abrupt increase in strain rates that result in the transition from dislocation creep and GBS (velocity strengthening) to unstable slip (velocity weakening). The processes are accompanied by occurrence of mid-crustal earthquakes, and formation of pseudotachylite veins along with SLZs.