The relationship between the microstructures and the mechanical properties in the ternary Zr–Co–Pd alloys has been investigated. X-ray diffraction measurements at room temperature indicated that Zr 50 Co 50−x Pd x alloys underwent martensitic transformation from B2 to B33 structures as a result of substituting Pd for Co at amounts greater than 12 at%. The yield and tensile strength increased at a substitution amount of 6 at%. The total elongation remarkably increased as a result of substituting Pd for Co at amounts up to 10 at%; in particular, the Zr 50 Co 40 Pd 10 alloy exhibited a considerably high total elongation of 22%. Deformation-induced martensite with a lenticular morphology was observed in the B2 parent phase near the fractured edge, in addition to dislocation with the <100> B2 -type Burgers vector. Consequently, we conclude that the remarkable enhancement of the ductility is due to the transformation-induced plasticity associated with the deformation-induced martensite.