This study was carried out to investigate the effect of grain size on the damping capacity of the Fe-26Mn-4Co- 2Al damping alloy. α’ and ε-martensite were formed by cold working, and these martensites were formed with a specific direction and surface relief. With an increase in grain size, the volume fraction of α’ and ε-martensite increased by decrement the austenite phase stability. This volume fraction more rapidly increased in cold-rolled specimen than in the specimen that was not cold-rolled. The damping capacity also increased more with the augmentation an increased grain size and more rapidly increased in cold-rolled specimen than in the specimen that was not cold rolled. The effect of grain size on the damping capacity was larger in the cold-rolled specimen than the specimen that was not cold-rolled. Damping capacity linearly increased with an increase in volume fraction of ε-martensite. Thus, the damping capacity was affected by the ε-martensite.