The nature of heterogeneous deformation bands and the mechanism of Goss texture formation have been studied in the process of cold rolling and annealing of 3%Si–Fe (111)[112] single crystals. After cold rolling, two kinds of shear bands are observed. Wide shear bands (type I) make an angle of 35° to the rolling direction in longitudinal section, whereas narrow shear bands (type II) have an angle of 17° Rotations of crystallite orientations within the shear bands occur in the direction predicted by theory, however, the angles of the bands cannot be satisfactorily rationalised at present. The fine recrysallized grains nucleated along shear bands of type I have preferentially Goss orientation with a small dispersion (±10°) along TD//[110], whereas those nucleated within the type II bands have approximately twice as large an orientation spread. Following the nucleation along shear bands, recrystallization takes place by growth into the surrounding matrix.