In Part 1 of the present study attention was given to the influence of the deformation temperature on the structural aspects of the strain induced martensite transformation in austenitic stainless steels. In this part the mechanical response is examined, both during and after the martensite transformation, with particular attention to the development of internal stress. The influence of internal stresses on the bulk mechanical response concerns both the nature of the elastoplastic transition and the extent of kinematic hardening. The approach taken to assess the development of internal stresses is to use strain reversal (Bauschinger) tests and tensile experiments performed on a neutron diffractometer. In this way the evolution of stresses in partially transformed samples can be measured in the absence of any further martensite transformation.