The article presents the results of an investigation of the effect of prior cold work on the stretchability of type 304 stainless steel sheet. The forming limit diagrams show decreased levels with increasing prior work. However, when the limits are plotted as total equivalent strain as a function of strain ratio, the ductility increases with prior cold work. Also, for a substantial range of strain ratios from plane strain towards equibiaxial, sheets with lower levels of prior cold work show sharply increasing ductility. The first observation is explained in terms of the adiabatic temperature rise and the temperature sensitivity of the strain-induced transformation (that occurs in type 304 stainless steel), which influences the strain hardening in the material. The second observation is understood in terms of the kinetics of the transformation, which depends on the state of stress. Finite element simulations using a model taking into account the strain-induced transformation also reveal many of the trends observed in the experiments. © Taylor and Francis Group, LLC.