Two-dimensional (2D) Ruddlesden-Popper perovskites form a new class of solar energy materials with high performance, low cost and good stability. Nonradiative electron-hole recombination is the main source of charge and energy losses, limiting material efficiency. Experiments show that edge states in 2D halide perovskites accelerate exciton dissociation into long-lived charge carriers, improving performance. Using a combination of nonadiabatic molecular dynamics and time-domain density functional theory, we demonstrate that unsaturated chemical bonds of iodine atoms at perovskite edges is the main driving force for hole localization. Chemically unsaturated Pb atoms confine electrons to a much lesser extent, because they more easily support different oxidation states and heal chemical defects. This difference between defects associated with metals and nonmetals is general to many nanoscale systems. Thermal atomic fluctuations play important roles in charge localization, even in the bulk region of 2D perovskite films, a phenomenon that is different from polaron formation. Charge localization at edges is robust to thermal excitation at ambient conditions. The separated charges live a long time, because the nonadiabatic coupling between the excited and ground states is small, under 1 meV, and quantum coherence is short, less than 10 fs. The calculations agree very well with the time-resolved optical measurements on both luminescence lifetime and line width. The detailed understanding of the excited state dynamics in the 2D halide perovskites generated by the simulations highlights the unique chemical properties of these materials, and provides guidelines for design of efficient and inexpensive solar energy materials.