Abstract The generalized elastoplastic constitutive equation for soils is proposed based on the subloading surface model extended so as to describe the dependence of both the magnitude and the direction of inelastic stretching on the stress rate tangential to the subloading surface [Int J Plasticity 17 (2001) 117]. It would be applicable to the analysis of deformation of soils in both normal-yield and subyield states for not only lower but also higher stress ratio than that in the critical state. Then, the shear band formation in the rectangular specimen subjected to the biaxial compression under the undrained plane strain condition is analyzed by the generalized equation, and thus the condition for shear band formation and the shear band inclination are discussed in relation to material properties and the state of stress, i.e. the stress-ratio and the normal-yield ratio. These results reveal that the tangential stretching term makes easy to fulfill the necessary condition of shear band formation for not only normal-yield but also subyield states, and further the formation is affected by the material parameter prescribing the approaching degree of the stress to the normal-yield state.