The temperature memory effect of shape memory alloy (SMA) induced by an incomplete martensitic inverse phase transformation has the potential values in various engineering fields. It is of theoretical and practical interests to establish a phase transformation model which overcomes the limitation that previous phase transformation models of SMA fail to take into account the temperature memory effect. In this paper, the curves of heat flow versus temperature of SMA during the martensitic phase transformation and martensitic inverse phase transformation are described as the quadratic functions of temperature. A new phase transformation model of SMA is developed based on the differential relationship between martensitic volume fraction and phase transformation free energy. Numerical results show that the new model well predicts the phase transformation behaviors of SMA associated with the temperature memory effect.