Natural Language Processing (NLP) has recently achieved great success by using huge pre-trained Transformer networks. However, these models often contain hundreds of millions or even billions of parameters, bringing challenges to online deployment due to latency constraints. Recently, hardware manufacturers have introduced dedicated hardware for NxM sparsity to provide the flexibility of unstructured pruning with the runtime efficiency of structured approaches. NxM sparsity permits arbitrarily selecting M parameters to retain from a contiguous group of N in the dense representation. However, due to the extremely high complexity of pre-trained models, the standard sparse fine-tuning techniques often fail to generalize well on downstream tasks, which have limited data resources. To address such an issue in a principled manner, we introduce a new learning framework, called NxMTransformer, to induce NxM semi-structured sparsity on pretrained language models for natural language understanding to obtain better performance. In particular, we propose to formulate the NxM sparsity as a constrained optimization problem and use Alternating Direction Method of Multipliers (ADMM) to optimize the downstream tasks while taking the underlying hardware constraints into consideration. ADMM decomposes the NxM sparsification problem into two sub-problems that can be solved sequentially, generating sparsified Transformer networks that achieve high accuracy while being able to effectively execute on newly released hardware. We apply our approach to a wide range of NLP tasks, and our proposed method is able to achieve 1.7 points higher accuracy in GLUE score than current best practices. Moreover, we perform detailed analysis on our approach and shed light on how ADMM affects fine-tuning accuracy for downstream tasks. Finally, we illustrate how NxMTransformer achieves additional performance improvement with knowledge distillation based methods.