Abstract: In the framework of metal matrix composites, a research gap exists regarding tailoring damage mechanisms. The present work aims at developing an Al/NiTi composite incorporating internal stresses in the vicinity of reinforcements. The composite is manufactured by friction stir processing which allows a homogenous NiTi distribution and a good Al/NiTi interface bonding. The internal stresses are introduced via shape memory effect of the embedded NiTi particles. The induced internal strain field is confirmed by digital image correlation and the corresponding stress field is evaluated by finite element simulation. It is found that the damage mechanism is modified in the presence of internal stresses. The consequent enhancement of fracture toughness arises by the fact that the internal stresses foster discrete damages shifted from the fracture ligament line. These damages release the stress concentration at the main crack tip and lead to a deviated crack path when coalescing to accommodate fracture propagation.