In the present investigation, different microstructures were obtained in AISI 321 austenitic stainless steel by cold rolling and subsequent annealing at different temperatures. The effect of initial microstructure on the work hardening behavior was analyzed using tensile analysis. At annealing temperatures of 700 and 800 °C, the stage I hardening is not apparent due to the high density of dislocations existed inside the austenite grains prior to tensile deformation. But the stage I hardening is seen in the ln(σ) ~ ln(ε) curves of the sample annealed at 900 °C and coarse grained one because the microstructures are consisted of equiaxed and dislocation free austenite grains. More detailed results were also obtained by differential Crussard-Jaoul analysis. This analysis indicated the occurrence of austenite to martensite transformation during tensile deformation of as received sample and that was annealed at 900 °C, which is distinguished by a positive slope in the ln(dσ/dε) vs. ln(ε) curves.