The localization of plastic flow (plastic instability) is a prelude to fracture initiation. Prior treatments are based mainly on the phenomenon of necking (load maximum) which has for its basis fluctuations in cross-sectional area. A second basic mode of localization has been confirmed experimentally. This is the localization of flow within a plastic zone along characteristic directions (direction of pure shear or zero extensional strain). The localization is effected by the activation of tangential velocity discontinuities along the characteristics. A necessary condition is that the material simulate the ideal plastic state. The conditions for this second mode of localization are formulated. A general condition for instability involving both modes is derived. In situations in which both modes are possible, necking is always expected to precede the localization along characteristics.