A series of unconfined and confined compression tests with acoustic emission monitoring and high resolution strain measurements was used in combination with mineralogical and micro-structural analyses to investigate the failure behavior of veined rock with large strength contrast between vein and matrix. The rock type used for this study was a sulfate-rich clay rock from the Gipskeuper formation in Switzerland, which typically shows a heterogeneous rock fabric consisting of distinct, weak clayey layers (matrix) and stiff Anhydrite veins. The study showed that at low deviatoric stress the failure behavior is dominated by the strength of the weak matrix where microcracks are initiated. Micro-structural and mineralogical variations were identified as the primary cause of strength and stiffness variations in the weak matrix. Upon compressive loading, these heterogeneities may cause stress or strain heterogeneities and, as a consequence, localized failure processes at different strain or stress levels. Depending on the orientation, distribution and mass fraction of stiff veins, specimen failure requires high stresses or strains in order to link micro-fractured region either by interface cracks (cracks alongside the interface between matrix and vein) or by cracks which penetrate stiff veins. Copyright 2013 ARMA, American Rock Mechanics Association.