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The effects of rare earth element Sm on the microstructure, mechanical properties, and shape memory effect of the high temperature shape memory alloy, Cu-13.0Al-4.0Ni-xSm (x = 0, 0.2 and 0.5) (wt.%), are studied in this work. The results show that the Sm addition reduces the grain size of the Cu-13.0Al-4.0Ni alloy from millimeters to hundreds of microns. The microstructure of the Cu-13.0Al-4.0Ni-xSm alloys are composed of 18R and a face-centered cubic Sm-rich phase at room temperature. In addition, because the addition of the Sm element enhances the fine-grain strengthening effect, the mechanical properties and the shape memory effect of the Cu-13.0Al-4.0Ni alloy were greatly improved. When x = 0.5, the compressive fracture stress and the compressive fracture strain increased from 580 MPa, 10.5% to 1021 MPa, 14.8%, respectively. When the pre-strain is 10%, a reversible strain of 6.3% can be obtained for the Cu-13.0Al-4.0Ni-0.2Sm alloy.