The microstructure of a Co38Ni33Al29 ferromagnetic shape memory alloy was determined by conventional transmission electron microscopy (TEM), electron diffraction studies together with advanced microscopy techniques and in situ Lorentz microscopy. Rod-like precipitates, 10–60 nm long, of hexagonal close-packed epsilon (Porson)-Co were confirmed to be present by high-resolution TEM. The orientation relationship between the precipitates and B2 matrix is described by the Burgers orientation relationship. The crystal structure of the martensite obtained after cooling is tetragonal L10 with a (1–11) twinning plane. The magnetic domain structure was determined during an in situ cooling experiment using the Fresnel mode of Lorentz microscopy. While transformation proceeds from B2 austenite to L10 martensite, new domains are nucleated, leading to a decrease in domain width, with the magnetization lying predominantly along a single direction. It was possible to completely describe the relationship between magnetic domains and crystallographic directions in the austenite phase though complications existed for the martensite phase.