Abstract Magnetic shape memory (MSM) effect is a new invention in actuator materials field, allowing even 50 times greater strains than in previous magnetically controlled materials (magnetostrictive). In MSM materials the magnetic field moves microscopic parts of the material (so-called twins) that leads to a net shape change of the material. In this study, the effect of alloy composition and heat treatment on the microstructure, local composition, and thermal and dilatometric properties of Ni2MnGa alloys were investigated. The results showed that as solidified, off-stoichiometric, alloys had three distinct microstructural features—a Heusler phase, a Mn-rich phase and a eutectic or eutectoid region. Various heat treatment procedures were applied to successfully remove the last phase. Heat treatment was also essential for the production of a distinct martensite transformation in DSC and dilatometry traces and a magnetic shape memory effect. Composition variations from Bridgman growth were large enough that a shift in martensite start temperature might occur in some parts of the alloy, based on literature data for the dependence of martensite start temperature on composition.