The stainless steel sheet of AISI-201 is shocked by means of Q-switched Ndglass laser setup with the 1064 nm output wavelength, 20 ns short pulse and 5 mm beam spot in diameter. The microstructure evolution of the shocked layer is analyzed by using the thermo-field emission scanning electron microscope (TESEM) and transmission electron microscope (TEM). The nano-crystallization behavior induced by laser shock and the mechanism are analyzed, as well as the effect on surface hardness. The experimental results demonstrate that the nano-crystalline grains with 20~50 nm in diameter are obtained on the surface layer up to the depth of 300 μm of the shocked stainless steel AISI-201, and the amorphous phase is also observed around some nano-crystalline grains. The hardness of the nano-crystallized surface is increased by 36% in comparison with the matrix of the stainless steel. It is considered that nano-crystallization process results from the co-action of grain′s smashing up and crystal′s defects of original austenite grains under the combination effect of the super strain rate and super-high power of laser shocking.