The effect of austenite (gamma) grain size on the formation process and morphology of epsilon martensite (epsilon) has been investigated by means of optical microscopy, transmission electron microscopy and X-ray analysis in an Fe-15 mass%Mn alloy, whose austenite grain size was controlled between 1 and 130 mum by the reversion treatment from deformation induced bcc martensite to gamma. With grain refining, the formation of epsilon tends to be suppressed and the starting temperature of gamma-->epsilon transformation (Ms(gamma-->epsilon)) is also lowered. In the grain size region below 30 mum, these phenomena are more significant. In the case of fine austenite grains, epsilon plates are formed across a small gamma grain from one boundary to the other. When the size of the gamma grain is above 30 pm, the microstructure change to a different one in which a lot of epsilon plates intersect each other within a large gamma grain. In this case, epsilon plates are formed on four {111}gamma planes in the Shoji-Nishiyama relationship. The formation process of epsilon plates in a large gamma grain is as follows. When one epsilon plate grows to some critical size, branching occurs at a tip of the epsilon plate in order to reduce the elastic stress at the gamma/epsilon interface, and epsilon plates with different variants are formed one by one on different {111}gamma planes. When the gamma grain size is small enough in comparison with the critical epsilon plate size, the gamma phase is stabilized because such a chain reaction in the epsilon transformation is suppressed owing to grain boundaries.