A three-dimensional multiple-slip dislocation-density-based crystalline formulation, specialized finite-element formulations, predictive failure models, and infinity-power integrable function based Voronoi tessellations adapted to martensitic orientations, were used to investigate large strain inelastic deformation, dislocation-density evolution in martensitic transformation, and heterogeneous failure modes in martensitic microstructures. The formulation is based on accounting for variant morphologies and orientations, secondary phases, such as retained austenite and inclusions, and initial dislocations-densities that are uniquely inherent to martensitic microstructures. The computational framework and the constitutive formulation were validated with experimental results for 10% Ni high-strength steel alloy. Furthermore, the formulation was used to investigate microstructures mapped directly from SEM/EBSD images of martensitic steel alloys. The interrelated effects of microstructural characteristics, such as parent austenite orientation, variants distribution and arrangement, retained austenite, inclusions, initial dislocation-density, and defects, such as microcracks, and microvoids, were investigated for different failure modes such as rupture, transgranular and intergranular fracture, and shear localization over a broad spectrum of loading conditions that range from quasi-static to high strain-rate conditions. The computational predictions, consistent with experimental observations, indicated that variant morphology and orientations have a direct consequence on how shear-strain accumulation and failure evolves in martensitic microstructures subjected to quasi-static and high strain-rate loading conditions. The analysis shows that shear-strain localization occurs due to slip-system compatibilities corresponding to low-angle blocks boundaries, the loading direction and the long direction of laths, which result in shear-pipes. At specific triple junctions, rotation misalignments due to lattice and slip incompatibilities occur, and this further exacerbated by defects. The results underscore the inherent competition between shear localization, transgranular, and intergranular failure modes. For certain variant arrangements, which correspond to random low angle orientations, cracks can be blunted by dislocation-density activities along transgranular planes. The effects of strain rate and inclusions on the evolution of shear-strain localization were also investigated under both tensile and compressive loadings. Tensile hydrostatic pressure forms under dynamic loads, and combined with plastic shear-slip accumulation between inclusions and the martensitic matrix accelerate shear-strain localization.