A so-called damage percolation model is linked with a finite element model of a sheet forming process to offer a comprehensive study of ductile damage evolution. In the current study, a damage percolation code is linked with LS-DYNA, an explicit dynamic FEM code used to introduce local strain gradients and compliance effects due to damage-induced softening. The linked model utilizes a Gurson-based yield surface to account for the softening effects of void damage, while the local damage development and void linkage events are modeled using the damage percolation code. The percolation code accepts detailed second phase particle fields from image analysis of a 2.0×1.6 mm optical micrograph of AA5182 aluminum alloy sheet. The model is applied to a stretch-flange stamping process which is known to be a damage-sensitive operation. The critical conditions for fracture are predicted for various initial stretch flange hole sizes.