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Thermal cycling of NiTi shape memory alloys is associated with functional fatigue: the characteristic phase transformation temperatures decrease with increasing number of cycles, and the transformation behavior changes from a single- to a two-stage martensitic transformation involving the intermediate R-phase. These effects are usually attributed to a gradual increase of dislocation density associated with micro-plasticity during repeated cycling through the transformation range. Here, these changes are shown to increase at a higher maximum temperature (in the fully austenitic state) during differential scanning calorimetric cycling of a Ni-rich alloy. Additional thermal cycling experiments without repeated phase transformations, and post-mortem microstructural observations by transmission electron microscopy, demonstrate that a relevant portion of functional fatigue is due to the formation of nano-scale Ni-rich precipitates of type Ni₄Ti₃ even at temperatures relatively close to the austenite finish temperature. These results show that both dislocation generation during the diffusion-less phase transformation, and diffusion-controlled nucleation and growth of Ni₄Ti₃ precipitates, can interact and contribute to the evolution of functional properties during thermal cycling of Ni-rich NiTi.