The residual magnetic field from strain induced α'-martensite phase in cold worked in AISI type 304 stainless steel specimens has been non-destructively measured using Giant Magneto Resistance (GMR) sensor. Correlation has been established between GMR sensor output and volume fraction of martensite accurately determined using X-ray diffraction analysis. Metallographic examination has been carried out to understand the microstructural changes with amount of cold work. Using GMR sensor it is possible to detect 2.8% martensite phase in 10% cold worked specimens. As the GMR sensor saturates after 1.4 mT, identification of severely deformed region i.e. equivalent of more than 40% cold work or 14% martensite phase in components made of AISI type 304 stainless steels is a possibility.