Adiabatic shear bands have been observed in the serrated chip during high strain rate metal cutting process of medium carbon steel and titanium alloy The recent microscopic observations have shown that dynamic recrystallization occurs in the narrow adiabatic shear bands. However the conventional flow stress models such as the Zerilli-Armstrong model and the Johnson-Cook model, in general, do not predict the occurrence of dynamic recrystallization (DRX) in the shear bands and the thermal softening effects accompanied by DRX. In the present study, a strain hardening and thermal softening model is proposed to predict the adiabatic shear localized chip formation. The finite element analysis (FEA) with this proposed flow stress model shows that the temperature of the shear band during cutting process rises above 0.5Τ$_{m}$. The simulation shows that temperature rises to initiate dynamic recrystallization, dynamic recrystallization lowers the flow stress, and that adiabatic shear localized band and the serrated chip are formed. FEA is also used to predict and compare chip formations of two flow stress models in orthogonal metal cutting with AISI 1045. The predictions of the FEA agreed well with the experimental measurements.s.