This paper deals with the evolution of microstructure and texture during hot rolling of hafnium containing NiTi based shape memory alloy Ni49.4Ti38.6Hf12. The formation of the R-phase has been associated with the precipitation of (Ti,Hf)2Ni phase. The crystallographic texture of the parent phase B2 as well as the product phases R and B19′ have been determined. It has been found that the variant selection during the B2 → R phase transformation is quite strong compared to the case of the B2 → B19′ transformation. During deformation, the texture of the austenite phase evolves with strong Goss and Bs components. After transformation to martensitic structure, it gives rise to a [011]||RD fiber. Microstructure and texture studies reveal the occurrence of partial dynamic recrystallization during hot rolling. Large strain heterogeneities that occur surrounding (Ti,Hf)2Ni precipitates are relieved through extended dynamic recovery instead of particle stimulated nucleation.