Microstructural evolution of bond coat with thermal cycling was characterized with transmission electron microscopy (TEM) and high temperature X-ray diffraction (HT-XRD) analysis. Before thermal cycling, the structure of asfabricated bond coat was confirmed to be a long-range ordered B2 β-phase. After thermal cycling to ∼28% of the cyclic life, the bond coat was found to transform into a Nirich L10 martensite (M) from its original B2 structure. The transformations, M ↔ B2, were demonstrated to be reversible and to occur on heating and cooling in each cycle. Quantitative high temperature XRD measurements verified the phase transformations produce about 0.7 % transformation strain. Finite element calculations incorporating the transformation strain indicate that the mertensitic transformation significantly influences the development of stresses and strains in TBC systems.