A thermodynamic analysis of flow-induced phase transformations in polymers is presented. Calculations are based on the assumption that stresses on the polymer coils lower their effective flexibility. This leads to the possibility of a spontaneous liquid separation in which the more concentrated phase contains chains having a lower flexibility relative to those in the more dilute phase. The effects of molecular weight distribution are included, and calculations demonstrate that reducing the flexibility also enhances fractionation in that the more concentrated phase is preferentially enriched with the higher molecular weight fraction of the original polydisperse system. These results offer a quantitative basis for understanding flow-induced structure formation and phase transformation phenomena in polymers in general and the phenomena of precursor formation and polymer fractionation in flow-induced crystallization in particular. Application to the latter phenomenon is also discussed.