The microstructure of a microalloying non-quenching and tempering steel developed recently was analyzed through OM, SEM and TEM, in order to find the strengthening and toughening mechanisms of the steel. All of the dislocations and subgrain boundaries in the grains, the martensite in the martensite-austenite islands of the grainy bainite structure, the dispersed phases in the grains and at the grain boundaries, and the grain size were observed and studied in our experiments. The results indicate that the strengthening results from phase transition, dislocation, subgrain structure, dispersion phase and fined grain, and the toughness relates with the ferrite matrix consisting of the grainy bainite and the grain size of the steel. The mechanisms between the hot-rolled-and-cooled and the tempered steel are slightly different.