A friction stir butt-welded Ti- and Nb-modified 12 % Cr ferritic stainless steel joint without any defects was successfully produced under low welding heat input. The welding heat cycles, temperature profiles, and degree of plastic deformation during welding were quantitatively evaluated based on the results of a rigid-viscoplastic thermo-mechanically coupled model. Microstructure development in the stir zone (SZ) and thermo-mechanically affected zone (TMAZ) was studied and comparatively analyzed. A fine duplex microstructure containing nearly 62.9 % martensite and 37.1 % ferrite was obtained in the SZ. Undissolved nanometer-sized precipitates during welding played a crucial role in grain refinement in the weld. Retardation of dynamic recrystallization (DRX) occurred in the SZ, and the recrystallized grains were no more than 8% of the materials. The dynamic recovery and continuous DRX experienced by the ferrite grains in the TMAZ of the advancing side were more intense than those on the retreating side, leading to a higher amount of high-angle boundaries and a 20.8 % reduction in dislocation density. The hardness and strength in the SZ apparently increased owing to refined grains and phase transformation. Both the heat-affected zone with a fully ferritic structure and the SZ exhibited superior low-temperature toughness.