The physical phenomena and engineering applications of martensitic phase transformations are the focus of intense ongoing research. The martensitic phase transformation and functional properties such as the shape-memory effect and superelasticity are strongly affected by the crystal size at the nanoscale. The current state of research on the impact of crystal size on the phase stability of the martensite is reviewed summarizing experimental results of various nanostructured martensitic materials and discussing the corresponding theoretical approaches. The review outlines the effects of crystal size on the complex morphology of the martensite, leading to interface structures not encountered in coarse-grained bulk materials. The unique shape-memory properties of martensitic materials can persist even at the nanoscale. Nanocrystalline martensitic materials can be processed to obtain tailored functional properties in combination with enhanced strength. Structural changes of metallic nanowires are similar to those arising by martensitic phase transformations and also can lead to shape-memory effects, as predicted by atomistic simulations.