The ferromagnetic Heusler alloy Pd2MnSn shows large reduction in magnetization by cold working, without any appreciable change in the Curie temperature. In order to clarify the relationship between the reduction and the defect structure in Pd2MnSn, transmission electron microscopic observation, high‐resolution neutron powder diffraction, and magnetization studies have been performed. In the deformed Pd2MnSn sample, dislocations are distributed inhomogeneously and form a cell structure. In the cell walls, a large amount of antiphase domain boundaries exist. A method of Rietveld refinement has been proposed for analyzing the powder neutron diffraction patterns of the cold‐worked sample, where all the contributions of defects (size, strain, and antiphase domain boundary) and the instrumental resolution to each reflection line are expressed in terms of Fourier coefficients, and inverse Fourier transforms of those product represent the calculated profile which is used for least‐squares refinement. Analyzing the experimental data with the method proposed, it is concluded that the reduction in magnetization in the deformed Pd2MnSn is due to an increase in the number of small antiphase domains which couple antiferromagnetically to each other.