Many polycrystalline shape memory alloys, e.g., Co-Ni-Al, Cu-Zn-Al, and Cu-Al-Ni, undergo intergranular fracture. To improve their transformation ductility, we perform Grain Boundary Engineering and stimulate the precipitation of a ductile second phase, which is a face-centeredcubic solid solution, along grain boundaries, by tailoring composition and thermal processing. Orientation imaging confirms precipitation along grain boundaries and unimpeded martensite growth towards grain boundary precipitates. Differential Scanning Calorimetry confirms reversible martensitic transformations in these dual-phase samples. These precipitates can accommodate transformation strain, relieve constraint in adjacent austenite grains, and arrest cracks by extensive plastic deformation, thereby improving transformation ductility and shape memory effects.