Dual phase (DP) steels have been receiving a great deal of interest in the automotive industries. Conventional process for the production of DP steels is the treating ferrite-pearlite or cold rolled ferrite-pearlite microstructure in the intercritical temperature region, for a specific time, followed by quenching to room temperature. Previous research showed that the mechanical properties of these microstructures are not proper candidate as the initial microstructure for the production of DP steel. While the mechanical properties of DP steels produced from the initial martensitic microstructure are suitable for the DP steel formation. To study the phase transformation of martensite in the intercritical annealing, the ferrite-pearlite microstructure is annealed at 900°C for 1800 s. Then the marteniste microstructure is hold at 740°C and 770°C for different time. The results illustrated that during the intercritical annealing, the martensitic structure changes to the tempered martensite with carbides (CrC). The increasing and intercritical annealing leads to the formation of acicular and globular austenite. The globular austenite preferably nucleates at four and three grain junctions and covers prior austenite grain boundaries. The acicular austenite also nucleates at prior austenite grain boundaries and grows to the ferritic regions. A longer annealing time leads to the coarse globular and thick acicular austenite. The globular and acicular austenite formation is controlled by the diffusion and bainitic mechanism. Additionally, the cold rolled feerite-martensite structure is cold rolled to 80% and then annealed at 740°C, 770°C and 800°C for different time. The hardness increases, decreases and then increases by increasing annealing time. Increasing, decreasing and then increasing hardness is due to the formation of carbides, recrystallization and formation of austenite, respectively. The recrystallization process proceeds much faster with increasing the annealing temperature. Increasing holding temperature leads to the much more austenite formation. Activation energy for the ferrite recrystallization and austenite for the formation is 84344.5 and 58059.2 J/mol.