Microstructural evolution during tensile deformation in ternary Zr-Co-Ni alloys were investigated using transmission electron microscopy to clarify the mechanism of the enhancement of ductility observed in these alloys. In Zr50Co39Ni11 alloy deformed at room temperature, lenticular martensite is observed in the B2 parent phase immediately after yielding, in addition to dislocations with the < 100 >(B2)-type Burgers vector. The orientation relationship between the B2 parent phase and B33 martensite is determined to be [001](B2)//[100](B33), (010)(B2)//(021)(B33), and (110)(B2)//(010)(B33). A midrib-like contrast is observed at the center of the lenticular martensite variant, and it is found to be a (021)(B33) twin. A trace analysis indicates that this contrast is nearly parallel to the {100}(B2), which may correspond to the habit plane of the martensite. The martensite variants grow into the B2 parent phase along the {100}(B2) with increasing tensile loading, and then grid-shaped martensite variants are formed at the failure of the specimen. The martensite would be dominantly formed and grow in the regions where the stress concentration occurs during tensile deformation. It is likely that the plastic deformation mainly proceeds in the untransformed B2 parent phase because this martensite is harder than the B2 parent phase. Consequently, the authors conclude that the remarkable enhancement of ductility can be attributed to a transformation-induced plasticity associated with deformation-induced martensite.