Abstract Of late surface nanocrystallization of steels has become an important topic for researchers due to the exceptional properties obtained after nanocrystallization. Austenitic stainless steel is very important alloy for industrial applications due to its corrosion resistance and versatile mechanical properties. However, austenitic stainless steel lacks in surface wear resistance. Surface nanocrystallization of austenitic stainless steel component can eliminate this drawback. This work involved fabrication of nanocrystallized layer on specimens of AISI 316 stainless steel. Nanocrystallized layer was synthesized by shot-peening process. Shots were propelled towards target surface by newly developed surface mechanical attrition treatment like process. The principal objective of the present work was to investigate nanocrystallization behaviour of AISI 316 stainless steel under adiabatic and non-adiabatic severe plastic deformation conditions. Two types of flow were used to propel the shots. In first method, only compressed air was used whereas in second method mixture of compressed air and water was used. Water is used to extract rapidly the heat generated during shot-peening so as to produce non-adiabatic conditions. After shot-peening, specimens were characterized by micro-hardness testing, optical microscopy, SEM and XRD. Results showed that nanocrystallized layer on AISI 316 stainless steel specimens can be easily synthesized by severe shot-peening. Hardness traverse as well as optical microscopy showed that with rise in velocity of shot, surface hardness, depth of nanocrystallized layer and total deformed layer increased for shot-peening with both types of flow. However, surface hardness, depth of nanocrystallized layer are higher for the specimen shot-peened using mixture of air and water. No strain induced martensite was observed when specimens were shot-peened by using only air, however, significant volume fraction of strain induced martensite (17.5 to 28.3%) was observed when shot peened with air/water mixture.