Shear localization occurs in various instances of material instability in solid mechanics and is typically associated with Hadamard-instability for an underlying model. While Hadamard instability indicates the catastrophic growth of oscillations around a mean state, it does not by itself explain the formation of coherent structures typically observed in localization. The latter is a nonlinear effect and its analysis is the main objective of this article. We consider a model that captures the main mechanisms observed in high strain-rate deformation of metals, and describes shear motions of temperature dependent non-Newtonian fluids. For a special dependence of the viscosity on the temperature, we carry out a linearized stability analysis around a base state of uniform shearing solutions, and quantitatively assess the effects of the various mechanisms affecting the problem: thermal softening, momentum diffusion and thermal diffusion. Then, we turn to the nonlinear model, and construct localized states -in the form of similarity solutions -that emerge as coherent structures in the localization process. This justifies a scenario for localization that is proposed on the basis of asymptotic analysis in [10]