Heterogeneity arises in soil subjected to interface shearing, with the strain gradually localizing into a band area. How the strain localization accumulates and develops to form the structure is crucial in explaining some significant constitutive behaviors of the soil–structural interface during shearing, for example, stress hardening, softening, and shear-dilatancy. Using DEM simulation, interface shear tests with a periodic boundary condition are performed to investigate the strain localization process in densely and loosely packed granular soils. Based on the velocity field given by grains’ translational and rotational velocities, several kinematic quantities are analyzed during the loading history to demonstrate the evolution of strain localization. Results suggest that tiny concentrations in the shear deformation have already been observed in the very early stage of the shear test. The degree of the strain localization, quantified by a proposed new indicator, α, steadily ascends during the stress-hardening regime, dramatically jumps prior to the stress peak, and stabilizes at the stress steady state. Loose specimen does not develop a steady pattern at the large strain, as the deformation pattern transforms between localized and diffused failure modes. During the stress steady state of both specimens, remarkable correlations are observed between α and the shear stress, as well as between α and the volumetric strain rate.