This paper reports on a novel heat treatment method for the creation of functionally graded near-equiatomic NiTi shape memory alloys. The method is an anneal within a temperature gradient after cold work, thus creating a structural gradient within the matrix of the alloy. It is based on the principle that the transformation behaviour and the thermomechanical properties of NiTi are sensitively dependent on the annealing temperature. For the Ti–50.2 at.% Ni alloy used, it was found that the gradient-anneal resulted in varying thermal transformation behaviour along its length and a unique Lüders-type deformation behaviour with a positive stress gradient. Such behaviour provides improved controllability for actuation applications.