In the present work, the effects of externally applied hydrostatic pressure on the isothermal martensitic transformation ana the stabilization of retained austenite due to prior martensitic transformation are studied. The microstructure of martensite formed under different stress states are also of interest in this research. It is found that the applied hydrostatic pressure affects the martensitic transformation by lowering its starting temperature (M(s)), and the pressure dependence of isothermal martensitic transformation is similar to the temperature dependence of athermal martensitic transformation. Calculations based on a homogeneous nucleation model suggest that the austenite phase can be stabilized completely at low temperatures by using hydrostatic pressure and that the isothermal martensitic transformation under applied hydrostatic pressure shows a pressure-temperature C-curve behaviour. It is found that, at the same aging conditions, the magnitude of the stabilization of retained austenite during a two-step cooling experiment increases with increasing the amount of previously formed martensite, and the retained austenite can be stabilized completely when the amount of previously formed martensite is large enough. The mechanism of the stabilization of retained austenite during the two-step cooling experiment is proposed to be mainly due to the inhibition effect of the internal resisting stress which is induced by the prior martensitic transformation, while the aging processes are the necessary conditions for the above mechanism to operate. By simplifying the internal resisting stress to be a hydrostatic compressive stress, and by assuming that it obeys a quadratic relationship with the amount of previously formed martensite, the theoretical calculation is found to fit well with the experimental results. Under applied hydrostatic pressure or the internal stress state induced by prior martensitic transformation, no marked change in the morphology and microstructure of martensite is observed even though the M(s) temperature is much lowered. However, under the applied plane stress state, both the previously formed thin-plate martensite and the twin bands inside the martensite are isothermally widened markedly.