The stress-induced martensitic transformation and its relation with crack nucleation and propagation in CuNiAl shape memory alloy were investigated through in-situ tensile tests by SEM and TEM. The results indicated that the stress concentration ahead of the crack tip could induce formation of stacking faults and different types of martensites. TEM observations showed that the martensites could transform from one type to another and even reversely to the parent during loading. The micro-cracks nucleated along the martensite/parent interface and intersection between two martensites. When the crack propagated a certain distance, the stress concentration ahead of the crack tip was large enough to result in formation of slip bands, and in this condition the microcrack nucleated along slip bands more easily. The stress-induced martensitic transformation and its relation with crack nucleation and propagation in CuNiAl shape memory alloys were investigated through in situ tensile tests by SEM and TEM. The results indicated that the stress concentration ahead of the crack tip could induce formation of stacking faults and different types of martensites. TEM observations showed that the martensites could transform from one type to another and even reversely to the parent during loading. The micro-cracks nucleated along the martensite / parent interface and intersection between two martensites. When the crack propagated a certain distance, the stress concentration ahead of the crack tip was large enough to result in formation of slip bands, and in this condition the microcrack nucleated along slip bands more easily.