The objective of this study is to investigate the effect of solution-treatment temperature on the microstructure and damping capacity of a martensitic Fe-7%Ni-0.4%C alloy. The size of lath increased from 0.3㎛ to 0.55㎛ with increasing the solution-treatment temperature from 700 to 1100℃. In addition, the size of block, packet, and austenite grain had tendency to increase with increasing solution-treatment temperature. The damping capacity of the Fe-7%Ni-0.4%C martensitic alloy decreased with increasing the solution treatment temperature. The reason is not attributed to the increase in the size of lath, block, packet, and austenite grain, but to the increase in vacancy concentration which hinders dislocation motion.