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Molecular dynamics simulations are performed to investigate temperature- and stress-induced phase transformations in nanocrystalline nickel-titanium shape-memory alloys. Our results provide detailed insights into the origins of the experimentally reported characteristics of phase transformations at the nanoscale, such as the decrease of the transformation temperature with grain size and the disappearance of the plateau in the stress-strain response. The relevant atomic scale processes, such as nucleation, growth, and twinning are analyzed and explained. We suggest that a single, unified mechanism—dominated by the contribution of a local transformation strain—explains the characteristics of both temperature- and stress-induced phase transformations in nanocrystalline nickel-titanium.