Whenever the forward and/or reverse B2 cubic to B19’ monoclinic martensitic transformation in NiTi shape memory alloy wire proceeds under external stress above certain threshold, it generates incremental plastic strains which accumulate during thermomechanical cyclic loading and lead to functional fatigue preventing many promising engineering applications from realization. In this work, unique thermomechanical loading experiments were performed on NiTi shape memory wire with the aim to reveal the mechanism by which the forward martensitic transformation upon cooling under external stress generates plastic strain. Recoverable transformation strains and plastic strains generated by the forward transformation on cooling under various tensile stresses were evaluated, martensite variant microstructures in grains were reconstructed by nanoscale orientation mapping in TEM, martensite textures after cooling at room temperature were evaluated by in-situ synchrotron x-ray diffraction and permanent dislocation defects in martensite were analyzed by TEM. Based on the obtained experimental evidence, it is proposed that the forward martensitic transformation on cooling under stress proceeds via habit plane interfaces between austenite and second order laminate of (001) compound twins in martensite. Depending on the magnitude of the applied stress, the induced martensite reorients, partially detwins and deforms plastically via [100](001) dislocation slip in martensite in extent permitted by the requirement for compatible deformation of grains in nanocrystalline NiTi wire via a single deformation system. During the forward MT upon cooling under highest stresses 600 MPa, the martensite deforms via kwinking deformation enabling generation of large plastic strains 8 %.
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