Dynamic strain aging (DSA) affects a material’s mechanical behaviour. In the current study, the deformation microstructures of AISI 316 stainless steel specimens were examined after tensile testing at several temperatures both in and out of the DSA-regime (200, 288 and 400 °C), and the effect of straining on free nitrogen evolution at those temperatures was studied by Anelastic Mechanical Loss Spectrometry (Internal Friction). Analysis of the nitrogen-induced Snoek-like peak after straining indicated that DSA behaviour is associated with the formation of sub-micron scale, nitrogen-enriched zones in the austenitic matrix. Long-range planarity was observed in the dislocation structures at 400 °C and short-range planarity at 288 °C, but at 200 °C the microstructure exhibited cellular dislocation structure. Diffusion re-distribution of nitrogen in the DSA-regime affected the deformation behaviour of the material by restricting cross-slip, which in turn promotes strain localization, degrading the mechanical performance of the material.