A damage percolation model has been developed to simulate damage development and ductile fracture within heterogeneous particle distributions. The percolation model has been extended to incorporate the stress state, material softening and a coalescence model linking the void geometry with the applied stress. A nucleation criterion is developed where void nucleation is related to the particle morphology, hydrostatic stress and shear loading. The nucleation criterion is calibrated by subjecting three particle fields from an aluminum–magnesium alloy to different loading conditions to achieve agreement with experimental forming limit data. The calibrated percolation model can successfully recreate the forming limit curve of the material and, more importantly, provide predictions for the average area fraction and size of nucleating particles which are in good agreement with the available experimental data.