The deformation mechanisms of the metastable austenite phase of a transformation induced plasticity (TRIP) stainless steel, AISI 301LN, have been investigated by compression of multicrystalline micropillars of different crystallographic orientations, with particular attention on the strain-induced phase transformation from austenite to martensite. Intergranular shearing and twinning were observed to be the primary deformation mechanisms, with a predominant <122> orientation developed in the austenitic phase, combined with limited planar slip within single grains of austenite. The phase transformation from austenite to ε and α′-martensite was clearly observed adjacent to the sheared regions using TEM-EBSD techniques. The ε-martensite phase was found to be preferentially located in the regions near the grain boundaries which experienced higher shear stresses during compression.