Shear failure in sediments is universally linked with active boundary conditions, such as those imposed by tectonic stresses. Under conditions of no lateral strain, and in the absence of tectonic stress, soil mechanics theories predict a simple one-dimensional compaction in which sediment particles displace vertically without shear failure during pressure diffusion. Conflicting with this theory, shear failure planes are often found in sediments that formed under near-horizontal burial conditions. We investigated the effect of particle-scale volume contraction as a potential cause of shear failure in uncemented particulate materials and found that loss of particle volume under confined conditions (no external loading) resulted in pronounced lateral stress reduction, often reaching Coulomb frictional failure conditions. Shear strain localization was analytically predicted and modeled numerically, due entirely to volume loss at the grain scale. We define this mode of internally driven shear failure as “contractile” to distinguish it from that caused by external loading, and show that it can explain many natural fracture systems without invoking regional tectonics.