The pseudoelasticity behavior of memory‐steels has recently gained attention for applications in seismic‐resistant structures. The pseudoelasticity can be used to reduce residual deformations in building structures subjected to seismic loading. Fe‐based shape memory alloys (Fe‐SMA), which is also called as memory‐steel, have gained much attention because of their strong shape memory behavior and low material manufacturing cost, which justify their large‐scale application in construction. This research investigated the effects of heat treatment on microstructure and pseudoelasticity of a memory‐steel (Fe‐17Mn‐5Si‐10Cr‐4Ni‐1(V,C) %wt.). Various solution‐annealing treatments from 1000 to 1200 °C for 2 h and aging from 650, 750 and 850 °C were applied to investigate the microstructural evolution and pseudoelasticity behavior of the alloy. The results showed that increasing the solution annealing temperature caused grain growth and pseudoelasticity loss. On the other hand, the precipitation of (Cr,V)Cs after aging resulted in an improved pseudo‐elasticity. The large elastic strain field, which forms near the carbide precipitates, improves the pseudoelasticity. Furthermore, precipitates can provide preferential nucleation sites for the martensite phase and a high density of stacking faults in the austenite matrix. The study concludes that the best pseudoelasticity behavior was achieved after an aging at 750°C for 6 h.