In microalloyed steels, plastic instabilities often appear which have been found to be associated with changes in the microstructure. In this paper, research was carried out on the influence of the microstructure in different areas of the deformation zone during the formation of Lüders bands in niobium microalloyed steel. Thermography and digital image correlation during static tensile testing were used to research deformation behavior and the area before and during the formation of the Lüders band. Different local values of temperature changes, i.e., stress changes, and strains in the examined areas during the formation of the Lüders band were determined. The highest values of the temperature changes and strains during the formation of the Lüders band were measured in the area of the initial appearance of the Lüders band. In order to clarify the observed changes, a microstructural analysis, using X-ray diffraction, scanning electron and transmission electron microscopy methods, was used. It was established that the observed temperature, i.e., stress, and strain changes are related to changes in the microstructure. The analyses of changes in the microstructure, arrangement and interaction of dislocations with precipitates revealed significant changes in the movement of dislocations and their interaction with fine niobium-containing precipitates during the formation of Lüders bands. The influence of microstructural parameters on the Lüders band formation in niobium microalloyed steel has been established based on this research.