Ascertaining failure mechanism is a prerequisite of the derivation for earth pressure against retaining structures. Retaining structures constructed adjacent to existing structures and excavation with narrow backfill have become common in practical engineering. The backfill width has a significant effect on the failure mechanism, requiring further study. In this study, a series of discrete element analyses are conducted to investigate the shear localization in soil mass behind retaining structures with narrow backfill in the active and passive limit states at the grain scale. Furthermore, the distribution characteristic of failure surfaces in soil mass is discussed from three aspects: the development of the failure surface, the state of soil mass behind retaining structures, and the shape of the failure surface. Based on the typical nonlinear failure mechanisms observed in particle rotation contours with various backfill widths and interface friction angles, the failure mechanisms behind retaining structures with narrow spacing are categorized into three types according to the backfill widths. According to the stress characteristics of interfaces under different failure mechanisms, the variational method and Mohr stress circle analysis are adapted to analytically obtain the failure surfaces behind the retaining structure with narrow backfill. Comparisons with results obtained by the discrete element simulation show a reasonable agreement. In addition, a series of parameter studies are conducted to investigate the effect of backfill widths and interface friction angles on the failure mechanism.