In this study, AISI 321 austenitic stainless steel samples were surface treated using severe shot peening (SSP) with 1 000 % and 1 300 % coverages. Microstructural features including the grain size, phase transformation, and formation of sub-surface microcracks were investigated at the rough top surface and about 40 μm depth (top surface after grinding and removal of initial rough surface layer created by SSP). In addition, microhardness variations were thoroughly analyzed in-depth. Experimental results demonstrated that for both 1 000 % and 1 300 % coverages, the microstructures of top surface and 40 μm depth are respectively composed of equiaxed nano-grains and lamella-shaped cells; however, enhanced imparted strain in the case of 1 300 % coverage leads to the formation of considerable amounts of strain-induced martensite (α′) phase in the surface layers and consequently, due to strength increase and lack of deformability, some microcracks are created in the sub-surface layers (up to 20 μm depth).