To understand how martensitic transformation (MT) in polycrystalline NiTi shape memory alloy (SMA) proceeds under external stress, we evaluated recoverable transformation strains and plastic strains generated by the forward MT in nanocrystalline NiTi wire cooled under tensile stresses 0-600 MPa, determined textures in martensite and reconstructed martensite variant microstructures within the selected grains of the cooled wire. The obtained findings show that the forward MT proceeding under external stresses gives rise to characteristic recoverable transformation strains, plastic strains, martensite variant microstructures and martensite textures. MT occurring upon cooling under stresses exceeding 100 MPa creates martensite variant microstructures consisting of single domain of partially detwinned laminate of (001) compound twins filling entire grains. The recoverable transformation strain increases with increasing stress, reaches maximum ~5% at ~200 MPa stress, and remains constant with further increasing stress up to 600 MPa. Starting from 100 MPa stress, the forward MT generates also plastic strains, the magnitude of which also increases with increasing stress. We propose that, in the absence of external stress, the forward MT takes place via propagation of strain compatible habit plane interfaces between austenite and second order laminate of (001) compound twins. When the forward MT takes place under external tensile stress, it occurs equally, but the newly created martensite immediately reorients into single domains of (001) compound twins, partially detwins and deforms plastically under the action of the external stress. The plastic strain generated by the forward MT upon cooling under stress is attributed to the [100](001) dislocation slip in martensite at low stresses and plastic deformation of martensite by kwinking at high stresses.

35 pages, 15 figures