Cold worked and stress relieved Zr-2.5 wt%Nb alloy was annealed at 900 C for 5-90 min and quenched in water, which resulted in formation of α′ martensite and primary α phase. Reheating of the same samples to 700 C leads to α′ → αZr + βZr transformation following JMAK kinetics (n = 0.55 and k = 0.34). Tensile samples in annealed condition were deformed at 625-700 C over strain rates of 2 × 10-5-1 × 10-2 s-1. With the increase in annealing time, strain rate sensitivity and activation energy for deformation were found to change from 0.42 to 0.20 and 181.4-685 kJ/mol respectively. The maximum peak stress (136.5 MPa) obtained at 700 C from present results suggests higher load bearing ability of the Zr-2.5Nb alloy in annealed and quenched condition compared to that of cold-rolled and stress-relieved condition. © 2014 Elsevier B.V. All rights reserved.