An experimental and numerical test programme was conducted to investigate damage-induced ductile fracture in notched tensile sheet specimens of an aluminum–magnesium alloy. An upper bound, damage-based constitutive model was employed to estimate the formability of the material over a range of stress states found in sheet metal forming. Stress- and strain-based nucleation models are evaluated to characterize damage initiation and fracture of the material. The ligament strain-to-failure, elongation-to-failure and load–displacement curves can be captured using either nucleation rule. The advantages of each nucleation model are discussed in relation to quantitative measurements of damage available in the literature. Stress-based nucleation provides a promising approach for characterizing the nucleation behaviour over a range of stress states compared to strain-based nucleation.