Crack arrest effect on the propagation of cracks in steels, by using stress induced transformation and following volume change of dispersed SMA particles, has been studied. To realize the effect, Ti-Ni SMA particle dispersed Cr-Mo steel was fabricated by powder metallurgy method. The dissolution of Ti from Ti-Ni particle and the formation of Ti compound layer at the matrix-particle interface has been observed in the fabricated materials. These phenomena seemed to introduce the change in transformation temperatures of dispersed particles and to affect the crack propagation. Results of fracture toughness test suggested the stress release mechanism due to the debonding of matrix-particle interface near the crack tip.