The shear band formation at glass beads embedded in a polycarbonate matrix subjected to a uniaxial tension has been investigated by microscopic in situ observation. The degree of interfacial adhesion was varied by different glass surface treatments. To gain insight into the three-dimensional stress field requirement for shear band formation, the distributions of several elastic failure criteria around an isolated adhering glass sphere in a polycarbonate matrix have been computed with the aid of finite element analysis. It was found that the mechanism for shear band formation is fundamentally different for adhering and non-adhering glass beads. In the case of excellent interfacial adhesion, the shear bands form near the surface of the bead in regions of maximum principal shear stress and of maximum distortion strain energy. In the case of poor interfacial adhesion, shear band formation is preceded by dewetting along the interface between bead and matrix.