A Heusler Ni50Mn29Ga16Gd5 alloy with a high transformation temperature has been obtained by substituting 5 at% Gd for Ga in a ternary Ni50Mn29Ga21 ferromagnetic shape memory alloy. The microstructure and phase transformations in the Ni50Mn29Ga16Gd5 alloy have been investigated by scanning electron microscopy, transmission electron microscopy, X-ray diffraction and differential scanning calorimetry. It is shown that the microstructure of the Ni50Mn29Ga16Gd5 alloy consists of matrix and hexagonal Gd (Ni,Mn)(4)Ga phase, which indicates a eutectic structure composed of these two phases. One-step thermoelastic martensitic transformation occurs in this quaternary alloy. Ni50Mn29Ga16Gd5 alloy exhibits a martensite transformation start temperature up to 524 K, approximately 200 K higher than that of Ni50Mn29Ga21 alloy. At room temperature, non-modulated martensite with twin substructure is observed in Ni50Mn29Ga16Gd5 alloy.