The transformation behavior of near-equiatomic NiTi containing 0, 10, and 20 vol pct TiC particulates is investigated by dilatometry. Undeformed composites exhibit a macroscopic transformation strain larger than predicted when assuming that the elastic transformation mismatch between the matrix and the particulates is unrelaxed, indicating that the mismatch is partially accommodated by matrix twinning during transformation. The thermal recovery behavior of unreinforced NiTi which was deformed primarily by twinning in the martensite phase shows that plastic deformation by slip increases with increasing prestrain, leading to (1) a decrease of the shape-memory strain on heating, (2) an increase of the two-way shape-memory strain on cooling, (3) a widening of the temperature interval over which the strain recovery occurs on heating, and (4) an increase of the transformation temperature hysteresis. For NiTi composites, the recovery behavior indicates that most of the mis-match during mechanical deformation between the TiC particulates and the NiTi matrix is relaxed by matrix twinning. However, some relaxation takes place by matrix slip, resulting in the following trends with increasing TiC content at constant prestrain: (1) decrease of the shape-memory strain on heating, (2) enhancement of the two-way shape-memory strain on cooling, and (3) broadening of the transformation interval on heating.