Cavitation and cavitation erosion are sometimes unavoidable phenomena in hydro machine operation. For example, operating hydro turbines as regulating power leads to situations in which the risk of cavitation is accepted to some extent. Cavitation-resistant materials are therefore required to reduce machine damage and maintenance. This study characterizes the microstructure of two martensitic stainless steels from Francis turbines. They were already studied for cavitation erosion resistance in a previous study, and this study reveals the reasons behind the other steel having a significantly better resistance, while they had similar chemical compositions. The electron backscatter diffraction (EBSD) method is effective in defining the martensitic microstructure, specifically the block, packet, and prior austenite grain level. In addition, the retained austenite is effectively detected with the method. A fine prior austenite grain size and small packet and block sizes were found to be among the defining factors in cavitation erosion resistance of these steels. In addition, the transformation of retained austenite to martensite was detected in the edge region where cavitation had taken place. This transformation further increases cavitation erosion resistance. The better resistance of Steel 1 against cavitation was attributed to these microstructural differences. According to these findings, the microstructure in Steel 1 would be highly beneficial in building cavitation erosion resistant hydro machines and would be of interest to manufacturers of martensitic stainless steel components.