Reinforcement bars of microcomposite (MC) steel, composed of lath martensite and minor amounts of retained austenite, possess improved strength and corrosion characteristics over low-carbon (LC) steel rebar; however, their performance under shear loading has not previously been investigated at the microstructural level. In this study, LC and MC steel cylinders were compression tested, and specimens machined into a forced-shear geometry were subjected to quasi-static and dynamic shear loading to determine their shear behavior as a function of the strain and strain rate. The as-received and sheared microstructures were examined using optical microscopy (OM), scanning electron microscopy (SEM), and electron backscatter diffraction (EBSD). Higher-resolution microstructural examinations were performed using transmission electron microscopy (TEM). The influence of the starting microstructure on the shear behavior was found to depend strongly on the strain rate; the MC steel exhibited not only greater strain-rate sensitivity than the LC steel but also a greater resistance to shear localization with load. In both steels, despite differences in the starting microstructure, post-mortem observations were consistent with a continuous mechanism operating within adiabatic shear bands (ASBs), in which subgrains rotated into highly misoriented grains containing a high density of dislocations.