The thermo-simulation test and transmission electron microscopy (TEM) were applied to investigate the evolution of dislocation configuration and strain induced precipitation behavior during relaxation at 850°C in a deformed Fe-40Ni-Ti alloy. The stress relaxation curve can be divided into three stages, namely, the process of incubation, nucleation and growth, and the coarsening of strain-induced precipitates. The highly dense and twisted dislocations formed during the deformation develop into dislocation cells and finally, the sub-grains can be observed when relaxing to 1000s. The strain induced precipitates occur both onto the dispersed dislocations and dislocation cells. The precipitates pin the dislocations which results in retarding the progress of dislocation configuration evolution. As precipitates start to coarsen, the pinning effect weakens and the dislocations get rid of the pinning though bypassing mechanism. Adopting the same simulation test to bainitic steel, the optimum refinement could be obtained at 60-200s during relaxation processing, corresponding to the perfect dislocation cells formation of Fe-40Ni-Ti alloy.