The effects of grain orientation on transformation-induced plasticity in multiphase steels are studied through three-dimensional finite element simulations. The boundary value problems analysed concern a uniaxiallyloaded sample consisting of a grain of retained austenite surrounded by multiple grains of ferrite. For the ferritic phase, a rate-dependent crystal plasticity model is used that describes the elasto-plastic behaviour of body-centred cubic crystalline structures under large deformations. In this model, the criticalresolved shear stress for plastic slip consists of an evolving slip resistance and a stress-dependent term that corresponds to the projection of the stress tensor on a non-glide plane (i.e. a non-Schmid stress). For the austenitic phase, the transformation model developed by Turteltaub and Suiker (2006 Int. J. Solids Struct. at press, 2005 J. Mech. Phys. Solids 53 1747 is employed. This model simulates the displacive phase transformation of a face-centred cubic austenite into a body-centred tetragonal martensite under external mechanical loading. The effective transformation kinematics and the effective anisotropic elastic stiffness components in the model are derived from lower-scale information that follows from the crystallographic theory of martensitic transformations. In the boundary value problems studied, the mutual interaction between the transforming austenitic grain and the plastically deforming ferritic matrix is computed for several grain orientations. From the simulation results, specific combinations of austenitic and ferritic crystalline orientations are identified that either increase or decrease the effective strength of the material. This information is useful to further improve the mechanical properties of multiphase carbon steels. In order to quantify the anisotropic 1 Author to whom any correspondence should be addressed.