Microstructure evolution of biphase TC21 alloy before and after hydrogenation as well as dehydrogenation was investigated by XRD, OM and TEM. The results show that the amount of β phase increases gradually as the hydrogen content increases; fcc δ hydrides appear when the hydrogen content reaches above 0.319%. Hydrides mainly precipitate by eutectoid transformation through diffusion during the cooling process after high-temperature hydrogenation. Because of the lattice distortion caused by eutectoid transformation, recrystallization occurs after the dehydrogenation, so the grains are refined and become much more homogenous.