Tensile residual stress occurring due to the difference of coefficients of thermal expansion between fiber and matrix is one of the serious problems in metal matrix composites (MMC). In this study, TiNi alloy fiber was used to solve the problem of the tensile residual stress of TiNi/Al6061 shape memory alloy(SMA) composite as the reinforced material. TiNi alloy fiber improves the tensile strength of a composite by inducing compressive residual stress in the matrix using its shape memory effect. The fixture was made to hold TiNi shape memory fiber uniformly. Some tensile test specimens with several volume fractions are made by the hot pressing method under the optimum processing condition. In order to generate the compressive residual stress in TiNi/Al6061 SMA composite, 1%, 3% and 5% pre-strain was added in advance. It was evaluated the effect of compressive residual stress corresponding to pre-strains variation using the acoustic emission(AE) technique. AE technique was also used to clarify the damage behavior and the microscopic failure mechanism of TiNi/Al6061 SMA composite. In addition, a two-dimensional AE source location technique was applied to measure the position of the crack initiation and propagation in composites.