AISI 4340 steels are used in applications where high strength and toughness are required, for example, in power transmission gears and shafts, aircraft landing gear and other structural components. The required mechanical properties are achieved by hot rolling and quenching and tempering (Q&T) heat treatment. For optimum process efficiency and quality control, it is desirable to monitor the microstructural development during tempering in situ, as the microstructure is directly linked to the mechanical properties. Electromagnetic (EM) sensors have been shown to be sensitive to steel microstructural changes due to the associated changes in magnetic and electrical properties. This study reports on using a high-temperature laboratory EM sensor that operates inside a furnace to assess microstructural changes that occur during tempering at 250°C for AISI4340 steel samples. The sensor operates at low magnetic field and low frequency where the signal is affected by changes in magnetic permeability due to microstructural changes. The microstructure and hardness have been characterised to correlate to the measured EM sensor signal. The results have shown that the EM sensor signal is affected by temperature and microstructural changes on the slow heating to the tempering temperature and then is sensitive to the continuing microstructure changes that occur during the isothermal hold. The results show the potential for in-situ EM sensor monitoring during heat treatment.