Grain size effects on the properties of AISI 304 austenitic stainless steel are studied. Yield stress (YS) and ultimate tensile strength (UTS) increased with decreasing grain size (Hall–Petch law) while the difference between YS and UTS decreased. Three distinct stages for work‐hardening rate are identified: I) initial rapid fall until reaching a minimum value, II) subsequent rise to a maximum due to the transformation‐induced plasticity (TRIP) effect, which is found to enhance by increasing grain size, and III) final fall until the onset of necking. More in‐depth analysis on the mechanical stability of austenite reveals that for below‐average grain size of ≈50 μm, by decreasing grain size, the TRIP effect diminishes; whereas for grain size larger than ≈50 μm, by increasing grain size, the TRIP effect becomes less pronounced. Due to the strong TRIP effect, high incremental work‐hardening exponents (n‐values of higher than 0.8) and low‐yield ratios (smaller than 0.5) are observed. It is also found that when the average grain size increases, the tensile toughness and the size and depth of dimples increase. The latter is responsible for the tardiness of the microcavity coalescence, which is indicative of high ductility of this austenitic alloy.