The contribution of multi-phase microstructure and retained austenite on mechanical properties of austempered and intercritical annealed Fe–0.23C–1.8Mn–1.35Si (wt%) steel was studied. The multi-phase microstructure comprised of intercritical ferrite (IF), bainite/martensite, and retained austenite. During austempering, the retained austenite was stabilized, which was studied using a combination of experimental (XRD, TEM) and thermodynamic analysis. The termination of bainitic transformation combined with carbon rejection into residual austenite during the second step austempering treatment is believed to be the underlying basis for stabilization of retained austenite. This led to significant increase in uniform and total elongation (25% and 36%, respectively) and the product of tensile strength and % elongation was 33 GPa%. The work hardening behavior of retained austenite exhibited a three-stage process such that necking was delayed. The increased work hardening rate is attributed to the multi-phase microstructure and TRIP effect.