Ultrasonic additive manufacturing (UAM) is a solid-state metal additive manufacturing process, with the combination of layer by layer ultrasonic seam welding and CNC machining. Due to the friction and deformation at the bonding interface, the ultrasonic softening effect and temperature generated, the microstructure of the substrate materials is evolving constantly. In this paper, in order to better understand the bonding mechanisms, the good practice and the capability of UAM, and the influence of different key process parameters on bonding quality, the microstructure evolution during UAM is reviewed in detail. Defects can be generated at the UAM bonding interface, but by choosing the right material combination and the right process parameters, defects can be reduced to minimum. Plastic deformation is very important for the bonding between layers during UAM, and plastic flow is important for redistribution of oxide layer, forming of mechanical interlocks, filling micro-valleys on the mating surface, and filling the gaps when embedding elements. UAM process can cause recrystallization and grain refinement at the welding interface and the intimate bulk materials around, and it will also gradually change the texture from rolling texture to shear texture. In the meantime, when further layers of materials are deposited on the top of the existing part, the microstructure will have some accumulative change. In order to reduce the defects number and increase the strength, sometimes, heat treatment needs to be carried out to the as-deposited parts, which will change the microstructure as well. Finally, the relevant research is summarised and the perspectives of further research are recommended.