The localization of deformation in recrystallizing materials is investigated via a series of two-dimensional grain-scale numerical simulations. These simulations couple a grain size and strain dependant viscous rheology with grain size reduction and grain growth processes. The simulations are able to predict the mechanical, microstructural and strain evolution of the polycrystals to high strain, and allow us to examine the nature of the time dependent feedback between mechanical and microstructural behavior. It was found that significant strain localization occurred only when the grain size dependence of the viscosity was non-linear, and was greatly enhanced by the activity of the grain size modifying processes. The intensity and location of the zone of strain localization varied spatially and temporally, with the result that the finite strain state showed a much broader, and hence less intense, zone of localized deformation than the instantaneous state.