This study was carried out to investigate the effect of deformation induced martensite on the damping capacity of Fe-26Mn-4Co-2Al damping alloy. α‘ and ε-martensite were formed by cold working, and; deformation induced martensite was formed with according to the specific direction and the surface relief. With an increasing degree of cold rolling, the volume fraction of α‘-martensite increased rapidly, while the volume fraction of ε-martensite decreased after rising to a maximum value at a specific level of cold rolling. Damping capacity was increased, and then decreased with an increasing of the degree of cold rolling. Damping capacity was influenced greatly by the volume fraction of ε-martensite formed by cold working, but the effect of the volume fraction of α‘-martensite have a actually on effect on the damping capacity.