A ductile solid solution phase gamma is introduced into austenite beta of a polycrystalline -Ni-Al Shape Memory Alloy (SMA) using thermal treatments. Thermally-induced martensitic transformation in this dual-phase SMA is detected by Differential Scanning Calorimetry and X-ray Diffraction. We perform nanoindentation tests using a Berkovich tip to study mechanically-induced martensitic transformations and transformation precipitate interactions. Deviation of load depth curve of austenite beta from Hertz elastic prediction indicates initiation of plastic deformation and possibly also martensitic transformation, the occurrence of which is supported by stress analysis. Compared to non-transforming gamma, strain recovery is significantly higher and percent energy dissipation is much lower in beta Indents in beta but at beta/gamma interfaces exhibited enhanced strain recovery, higher nanohardness, and lower energy dissipation in comparison to austenite beta. There is local strengthening at the beta/gamma interface. Additionally, gamma accommodates transformation strain in nearby beta by extensive plastic deformation, alleviating stress concentration beneath the indenter. The plastic accommodation by gamma also relieves the constraint imposed on transforming beta and decreases the energy barrier for transformation. As a result, less material deforms plastically and more transforms martensitically, improving superelastic properties in beta adjacent to gamma. Our results suggest that incorporation of a ductile second phase is promising for enhancing ductility and superelasticity of polycrystalline SMAs. (C) 2015 Acta Materialia Inc. Published by Elsevier Ltd. All rights reserved.