In the present work, drawing quality (DQ) and interstitial-free (IF) steel sheets were subjected to limiting dome height tests for determining strain-based forming limit diagrams (FLDs) experimentally and effect of dynamic (variable) material properties, such as work hardening ‘n’ and plastic anisotropy ( $$\bar{r}$$ ), on FLDs has been studied and simulated by PAMSTAMP™ finite element software. Dot prints on the steel specimens and an efficient optical strain measurement system GOM™ which works on the digital image correlation technique principle were used to measure limiting strains accurately instead of conventional circle grid analysis technique and strain measurement by traveling microscope. The dynamic (variable) material properties (n) and ( $$\bar{r}$$ ) were estimated by studying the microstructural developments in terms of changes in grain average misorientation and crystallographic texture, respectively, at different strains and strain paths, during deformation. In our proposed work, a novel technique of incorporating dynamic (variable) material properties (n and $$\bar{r}$$ ) in FE simulations was carried out during FLDs predictions. Though marginal but improved predictions in FLDs were observed in both IF and DQ steels. In addition to strain-based FLDs, stress-based FLDs were also determined for both grades. Interestingly, in both cases it was noticed that IF steel had higher formability than DQ steel.