In the present study, the effect of thermal cycling on the microstructure and tensile properties of an Fe-17Mn (wt%) alloy were investigated. The thermal cycling was carried out until 10 times between a lower temperature (TL) of 25 °C and a upper temperature (TU) of 300 °C. A nano-twinned γ structure was observed at TU during thermal cycling through in-situ transmission electron microscopic observation. Many stacking faults, such as intrinsic I1, intrinsic I2, and twin-like T2 stacking faults, were observed in ε martensite at TL. The nano-twinned γ structure was formed by the stacking faults with a localized fcc structure in ε martensite during the ε → γ reverse transformation. Namely, half of the stacking faults with a localized fcc structure had the same crystallographic orientation as an initial γ austenitic phase, while the other half had a twin relationship with the γ austenite. The stacking faults with a twin relationship caused nano-twins during ε → γ reverse transformation. The volume fraction of nano-twins at TU was linearly proportional to that of ε martensite at TL, supporting the result that nano-twins in the γ phase resulted from preexisting stacking faults in ε martensite during ε → γ reverse transformation. Both the yield and ultimate tensile stresses of the γ austenite at TU increased with an increase in the number of thermal cycles, while the elongation decreased. The significant increase in yield stress at TU was due to the increase in dislocations and nano-twins introduced into γ austenite during thermal cycling.