Austempering heat treatment practice helps in achieving high strength with good ductility and toughness by evolving a predominantly bainitic microstructure in the steel. Further, austempering practice can be modified to facilitate formation of some amount of ferrite and pearlite along with bainite which in turn enhances the ductility with some lowering of strength in the steel. The actual strength and ductility depends upon the relative amount of ferrite, pearlite and bainite present in the austempered steel. Present study was taken up to understand the influence of austempering parameters like austenitising temperature and cooling rate on the microstructure of an austempered steel with 0.4% carbon and 1.4% manganese. Laboratory simulation studies on conventional austempering showed that a microstructure comprising predominantly bainite with up to 4% ferrite was evolved which imparted a tensile strength of 120kg/mm 2 and elongation of 4% (at 150mm gauge length) to the austempered steel. On the other hand, when the steel was subjected to modified austempering practice which included austenitising at different temperatures for a period of 2min followed by controlled air cooling and quenching in a lead bath at 450°C, variety of microstructures were obtained. Particularly, when the steel was austenitised at 870–900°C, a microstructure comprising uniformly distributed fine pearlite and bainite in a matrix of ferrite was formed. This microstructure resulted in tensile strength of 95kg/mm 2 and elongation of 9% (at 150mm gauge length). Based on the results achieved in this study, a relationship was established between tensile properties and the volume fraction of ferrite formed during austempering of steel.