The aim of this work was the analysis of the relationships between material properties and forming limits of a sheet, caused by the strain localization in the groove. In particular, we aim at the replacement of a nonmeasurable inhomogeneity coefficient of the material, the value of which has to be taken a priori, by measurable coefficients. In the proposed model, it is assumed that the material heterogeneity is a result of surface roughness and presence of internal defects (voids). The value of inhomogeneity coefficients changes with increasing strain. The experiments were carried out for M85 brass sheets, annealed to produce different microstructures. The measured values of some material parameters: strain-hardening constants n and C, normal anisotropy factors, inhomogeneity coefficients (surface roughness and volume fraction of voids) as well as forming limit curve demonstrated their dependence on the grain size. As a result of the experimental work, original equations were proposed, describing the relationship between inhomogeneity coefficients and effective strain and grain size. These equations were used in the theoretical calculation of the forming limit diagram. The theoretical calculations of the strain limits of the tested sheets were based on the associated flow rules, assuming strain-hardening and strain-softening process (Shima-Oyane equation and equations based on the Gurson theory). The analysis of the influence of different material parameters on the forming limit diagram has shown that in the case of the material tested, the value of limit strains depends decisively on the values of the inhomogeneity coefficients and grain size. The postulates showing proportional relationship between the value of a strain-hardening exponent and limit strains were not confirmed.