Hot compression tests were performed on AISI 321 austenitic stainless steel in the deformation temperature range of 800–1200°C and constant strain rates of 0.001, 0.01, 0.1, and 1 s−1. Hot flow curves were used to determine the strain hardening exponent and the strain rate sensitivity exponent, and to construct the processing maps. Variations of the strain hardening exponent with strain were used to predict the microstructural evolutions during the hot deformation. Four variations were distinguished reflecting the different microstructural changes. Based on the analysis of the strain hardening exponent versus strain curves, the microstructural evolutions were dynamic recovery, single and multiple peak dynamic recrystallization, and interactions between dynamic recrystallization and precipitation. The strain rate sensitivity variations at an applied strain of 0.8 and strain rate of 0.1 s−1 were compared with the microstructural evolutions. The results demonstrate the existence of a reliable correlation between the strain rate sensitivity values and evolved microstructures. Additionally, the power dissipation map at the applied strain of 0.8 was compared with the resultant microstructures at predetermined deformation conditions. The microstructural evolutions strongly correlated to the power dissipation ratio, and dynamic recrystallization occurred completely at lower power dissipation ratios.