In the present work, the mechanism of martensitic transformation, the influence of gamma-Fe particle size on the martensitic transformation induced by cold working, and the transformation of gamma-Fe into alpha-Fe by thermal treatment alone in a Cu-1.5 at % Fe alloy, was studied using field ion microscopy (FIM) and transmission electron microscopy (TEM). It has been found that gamma-Fe precipitates smaller than about 10 nm did not transform martensitically to alpha-Fe by cold working. Precipitates larger than 10 nm adopted a Kurdjumov-Sachs orientation relationship with the copper matrix; and the martensitically transformed alpha-Fe precipitates were ellipsoidal in shape, with their major axes being oriented parallel to the [1 1 0] direction in the matrix. Dislocations were found in the matrix near the vicinity of transformed alpha-Fe precipitates, giving support to the dislocation cutting mechanism proposed by other workers for the transformation. In thermally aged alloys, no transformation of gamma-Fe to alpha-Fe was observed during the coarsening of gamma-Fe precipitates up to sizes as large as about 50 nm. These precipitates still remained coherent or semi-coherent with the copper matrix.