A discrete approach is proposed to study damage and failure processes taking place in argillaceous rocks which present a transversely isotropic behavior. More precisely, a dedicated discrete element method is utilized to provide a micromechanical description of the mechanisms involved. The purpose of the study is twofold: (1) presenting a three-dimensional discrete element model able to simulate the anisotropic macro-mechanical behavior of the Callovo-Oxfordian claystone as a particular case of argillaceous rocks; (2) studying how progressive failure develops in such material. Material anisotropy is explicitly taken into account in the numerical model through the introduction of weakness planes distributed at the interparticle scale following predefined orientation and intensity. Simulations of compression tests under plane-strain and triaxial conditions are performed to clarify the development of damage and the appearance of shear bands through micromechanical analyses. The overall mechanical behavior and shear banding patterns predicted by the numerical model are in good agreement with respect to experimental observations. Both tensile and shear microcracks emerging from the modeling also present characteristics compatible with microstructural observations. The numerical results confirm that the global failure of argillaceous rocks is well correlated with the mechanisms taking place at the local scale. Specifically, strain localization is shown to directly result from shear microcracking developing with a preferential orientation distribution related to the orientation of the shear band. In addition, localization events presenting characteristics similar to shear bands are observed from the early stages of the loading and might thus be considered as precursors of strain localization.