The expired project was supported by the Division of Materials Science of the Department of Energy for a two-year period; September 15, 1996- September 15, 1998. A theoretical investigation of the displacive coherent transformations in metal and ceramic materials was conducted. The fmal objective of this investigation is the development of realistic computer models, which would take advantage of the recent advances of the materials theory and computational methods to characterize the mesoscopic microstructure evolution of materials in materials processing. This research was focused on a behavior of coherent systems (martensitic systems, metal and ceramic, and ferroelectric systems) with defects. Although a presence of defects is an inherent property of practically any material and any transformation, there is a lack of knowledge of how the defects affect the transformation kinetics and thermodynamics. This is especially true for the theoretical study of this problem. The main aspect of the problem that was attacked, is a role of the long-range interaction between the transformation mode and the defects. This interaction is generated by the coherency strain caused by the crystal lattice misfit between the transformation products and the parent phase and the electrostatic dipole-dipole interaction in the ferroelectric materials.