Abstract The enhancement in formability of new advanced high strength steels (AHSS), such as duplex stainless steel, arises from increased hardening and ductility from complex deformation mechanisms, such as the transformation-induced plasticity (TRIP) effect. However, the interaction of dislocation and transformation mechanisms during deformation for various strain paths presents a challenge in evaluating formability. High fidelity simulation tools for evaluating formability need to capture these complex deformation mechanisms to allow manufacturers to realize their potential benefits. This work presents a rate-dependent crystal plasticity model with a micro-mechanics based transformation criteria to simulate the mechanical response of TRIP steel. A new stress-based transformation criterion, based on the micromechanics of fault band intersection on habits, was developed to initiate transformation. This model inherently captures the strain path effects of martensite transformation through the accumulated shear strain on slip systems. Simulations are calibrated and compared to experimental measurements of duplex stainless steel. Polycrystalline aggregate simulations show that although high Schmid factor habit planes were favorable for transformation, competition exists between the lower Schmid factor dislocation planes that generate higher elastic stress needed for transformation. The calibrated model is then used to predict the forming limit diagram using the Marciniak-Kuczynski approach. The mechanism of transforming from low strength austenite to high strength martensite showed enhanced formability by at least 20% compared to without transformation. This is achieved by the TRIP mechanism suppressing localization at critical moments during deformation. A parametric study of martensite transformation reveals the sensitivity of controlling the timing of martensite generation for improving formability.