A detailed analysis of martensite transformations in 18/8 (304) stainless steel, utilizing transmission electron microscopy and diffraction in conjunction with X-ray and magnetization techniques, has established that the sequence of transformation is γ → ∈ → α. e is a thermodynamically stable hcp phase whose formation is greatly enhanced as a result of plastic deformation. Comparison with the e → α transformation in pure Fe-Mn alloys lends further support to the above sequence and suggests that a transformation line between e and α in Fe-Cr-Ni alloys can be expected. In the 304 stainless steel used in this investigation, formation of α was induced only by plastic deformation and subsequent to formation of e. Nucleation of α occurs heterogeneously at intersections of e bands or where e bands abut twin or grain boundaries (which represent unilaterally compressed regions). From electron diffraction, the Nishiyama relationship between γ and α phases appears to predominate at the start of the transformation, but then changes to that of Kurdjumov-Sachs. Based on these observations, a sequence of atom movements from the hcp structure to the bcc structure is proposed which has the basic geometric features of the martensitic transformation.