This paper provides an in-depth study and description of cavitation damage and microstructural changes in two types of unalloyed austempered ductile iron (ADI). ADI materials used were austempered at 300 and 400°C having ausferrite microstructure with 16 and 31.4% of retained austenite, respectively. Metallographic examination was carried out to study the morphology of their cavitation-damaged surfaces. Cavitation damage was initiated at graphite nodules as well as in the interface between a graphite nodule and an ausferrite matrix. Furthermore, microcracking and ferrite/retained austenite morphology were proved to be of great importance for cavitation resistance. Mass loss rate revealed that ADI austempered at 400°C has a higher cavitation resistance in water than ADI austempered at 300°C. A higher amount of retained austenite in ADI austempered at 400°C played an important role in increasing cavitation resistance. The good cavitation behaviour of ADI austempered at 400°C was due to the matrix hardening by stress assisted phase transformation of retained austenite into martensite (SATRAM) phenomenon, as shown by X-ray diffraction analysis.