The neutron diffraction method provides a powerful nondestructive method to measure the loading and residual stresses in the interior of the materials and has been applied to the determination of the residual stress distribution in various engineering structures such as welded and brazed joints. The neutron method also gives useful information on the microscopic stress or the intergranular stress induced in single and multiphase materials by plastic deformation and fatigue. The method is also available for the determination of texture and phase transformation inside the materials. The present paper reviews the fundamentals for stress measurements and the latest applications of the neutron diffraction method in the field of materials science and engineering. Several directions of future developments of the neutron method are suggested.