The underlying physics of intermediate-depth earthquakes have been an enigmatic topic; several studies support either thermal runaway or dehydration reactions as viable mechanisms for their generation. Here we present fully coupled thermomechanical models that investigate the impact of grain size evolution and energy feedbacks on shear zone and pseudotachylite formation. Our results indicate that grain size reduction weakens the rock prior to thermal runaway and significantly decreases the critical stress needed for thermal runaway, making it more likely to result in intermediate-depth earthquakes at shallower depths. Furthermore, grain size is reduced in and around the shear zone, which agrees with field and laboratory observations where pseudotachylites are embedded in a simultaneously formed mylonite matrix. The decrease in critical stress to initialize localization has important implications for large-scale geodynamics, as this mechanism might induce lithosphere-scale shear zones and subduction initiation. We suggest that the combination of grain size reduction and shear heating explains both the occurrence of intermediate-depth earthquakes and the formation of large-scale shear zones.