The combined effect of grain size variation and plastic deformation on the acoustic nonlinearity parameter has been investigated in an austenitic stainless-steel material of grade 304. The nonlinear behavior of this parameter with grain growth has deviated to linear fit with deformation. This is due to the interaction of elastic waves with the strain-induced dislocation substructure in the grains. The normalized mean square strain of the deformed specimens has been estimated through angle dispersive x-ray diffraction studies using a synchrotron source, and this has been correlated with the change in the acoustic non-linearity parameter with deformation. The nonlinearity parameter is found to be very sensitive to the plastic deformation even in the presence of grain size variations. The results infer that the variations in the nonlinearity parameter can be used to have an estimate of the extent of localized deformations often occurring during the fabrication of metallic components.