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Functional fatigue (FF) during thermal and mechanical cycling, which leads to the generation of macroscopic irrecoverable strain and the loss of dimensional stability, is a critical issue that limits the service life of shape memory alloys (SMAs). Although it has been demonstrated experimentally that such a phenomenon is related to microstructural changes, a fundamental understanding of the physical origin of FF is still lacking, especially from a crystallographic point of view. In this study, we show that in addition to the normal martensitic phase transformation pathway (PTP), there is a symmetry-dictated non-phase-transformation pathway (SDNPTP) during phase transformation cycling, whose activation could play a key role in leading to FF. By investigating crystal symmetry changes along both the PTPs and SDNPTPs, the characteristic types of defects (e.g., dislocations and grain boundaries) generated during transformation cycling can be predicted systematically, and agree well with those observed experimentally in NiTi. By analyzing key materials parameters that could suppress the SDNPTPs, strategies to develop high performance SMAs with much improved FF resistance through crystallographic design and transformation pathway engineering are suggested.