Stimulated by recent experimental results on superelastic NiTi shape memory alloy, a theoretical study is carried out to quantify the effect of plasticity on stress-induced martensite transformation, using a constitutive model that combines phase transformation and plasticity. A constraint equation is introduced to quantify the phenomenon of the stabilization of plasticity on stress-induced martensite. The stabilized martensite volume fraction is determined by the equivalent plastic strain. The transformation constitutive model is adopted from a generalized plastic model with Drucker-Prager type phase transformation functions, which are pressure sensitive, while the plasticity is described by the von Mises isotropic hardening model.The martensite volume fraction is chosen as the internal variable to represent the transformation state and it is determined by the consistency transformation condition. An approach to calibrate model parameters from uniaxial tensile tests is explored, as well as the issue of elastic mismatch between austenite and martensite is discussed. Based on the proposed constitutive model, the influence of hydrostatic stress on transformation is examined. As an example of application, this new constitutive model is employed to numerically study the transformation field and the plastic deformation field near a crack tip.