Effect of phase transformation on damage-induced magnetization of 304 austenitic stainless steel is experimentally studied in this paper. Firstly, relationship between plastic deformation and the deformation-induced phase transformation of 304 austenitic steel is investigated. Then, compositions and distributions of phases in the 304 austenitic steel specimens are observed by an X-ray diffractometer and a magnetic force microscopy, respectively. Finally, relationship between the damage-induced magnetization and the deformation-induced ferromagnetic phase for the 304 austenitic steel is summarized. It is found that 1) the ferromagnetic α'-martensite phase increases systematically with the plastic deformation and distributes mainly at the in-grain slip lines. 2) the intensity of damage-induced magnetization depends linearly on the amount of ferromagnetic phase for 304 austenitic steel. It is also clarified that the reason why the damage-induced magnetization increases with plastic strain in the 304 steel is due to the increasing amount of ferromagnetic phase caused by plastic deformation.