We propose an approach to the definition and analysis of material instabilities in rate-independent standard dissipative solids at finite strains based on finite-step-sized incremental energy minimization principles. The point of departure is a recently developed constitutive minimization principle for standard dissipative materials that optimizes a generalized incremental work function with respect to the internal variables. In an incremental setting at finite time steps this variational problem defines a quasi-hyperelastic stress potential. The existence of this potential allows to be recast a typical incremental boundary-value problem of quasi-static inelasticity into a principle of minimum incremental energy for standard dissipative solids. Mathematical existence theorems for sufficiently regular minimizers then induce a definition of the material stability of the inelastic material response in terms of the sequentially weakly lower semicontinuity of the incremental variational functional. As a consequence, the incremental material stability of standard dissipative solids may be defined in terms of the quasi-convexity or the rank-one convexity of the incremental stress potential. This global definition includes the classical local Hadamard condition but is more general. Furthermore, the variational setting opens up the possibility to analyze the post-critical development of deformation microstructures in non-stable inelastic materials based on energy relaxation methods. We outline minimization principles of quasi- and rank-one convexifications of incremental non-convex stress potentials for standard dissipative solids. The general concepts are applied to the analysis of evolving deformation microstructures in single-slip plasticity. For this canonical model problem, we outline details of the constitutive variational formulation and develop numerical and semi-analytical solution methods for a first-level rank-one convexification. A set of representative numerical investigations analyze the development of deformation microstructures in the form of rank-one laminates in single slip plasticity for homogeneous macro-deformation modes as well as inhomogeneous macroscopic boundary-value problems. The well-posedness of the relaxed variational formulation is indicated by an independence of typical finite element solutions on the mesh-size. (C) 2004 Elsevier Ltd. All rights reserved.