Cu–Al–Ni shape memory alloys processed by powder metallurgy show very good thermo-mechanical properties, much better than those found in alloys produced by conventional casting. In this paper, we present the microstructural characterisation of these powder metallurgy alloys in order to find the microscopic mechanisms, linked to the powder metallurgy processing method, which are indeed responsible of such good thermo-mechanical behaviour. Electron microscopy studies [scanning electron microscopy (SEM), electron backscatter diffraction (EBSD) and transmission electron microscopy (TEM)] show that powder metallurgy processing creates a sub-grain structure characterised by the presence of low angle sub-boundaries. These sub-boundaries are found to be lying on {110} and {112} lattice planes and are composed by an arrangement of superdislocations. These sub-boundaries may improve ductility in two ways: acting as a sink of dislocations which promotes plastic deformation and decreasing stress concentration at grain boundaries. Moreover, since sub-boundaries act as weak obstacles for the movement of martensite plates, the improvement on ductility is accomplished by an adequate thermo-mechanical behaviour.