A significant fraction of ferrite has been identified in a 321 grade austenitic stainless steel in the solution heat treated condition. The microstructures were analysed using electron backscatter diffraction, energy dispersive X-ray spectroscopy and X-ray diffraction (XRD) and the stability of the ferrite investigated using heat treatments in a tube furnace, dilatometry and high temperature XRD. The ferrite dissolved ∼800°C, then formed again on cooling at temperatures under 200°C. Thermodynamic predictions showed a significant ferrite content at room temperature under equilibrium conditions, and the DeLong diagrams predict an austenite+martensite microstructure in the cast condition. Sensitivity analysis on the DeLong diagram has shown that the nitrogen content had a large effect on the austenite stability. The instability of the austenite and the subsequent transformation to ferrite on cooling can be attributed to low nitrogen content measured in the as received material. It was found that thermal aging of the material caused further transformation of austenite to ferrite as well as the formation of sigma phase that appears higher in nitrogen than the matrix phases. The diffusion of nitrogen into sigma phase may cause instability of the austenite, which could cause further transformation of austenite to ferrite on cooling from the aging temperature. The transformation of austenite to ferrite is known to be accompanied by an increase in volume, which may be of relevance to components made with tight dimensional tolerances.