In this study, the precipitation behavior of V in austenitic low-density steel (LDS) and its influence on microstructure and mechanical properties were investigated by X-ray diffraction, scanning electron microscope, transmission electron microscope, electron backscatter diffraction, physicochemical phase analysis and tensile testing in an attempt of enhancing the yield strength. Forging samples of novel Fe–25Mn–10Al-1.1C-(0,0.5)V (wt.%) austenitic LDSs were annealed at 900 °C followed by water quenching. Results showed that a drastic VC precipitation could be achieved in the austenitic matrix, which is mainly attributed to the decreased solid solubility products of VC and the reduction of the nucleation barrier due to the 10 wt% Al addition as well as the high C content. Thus, an extremely high yield strength of 1120 MPa, an increase of 260 MPa compared with that of the V-free steel, was obtained due to the precipitation strengthening and dislocation strengthening effect. Moreover, the addition of V inhibited the precipitation of κ-carbide and increased the ferrite content. Dispersedly distributed VC precipitates enhanced the initial work hardening rate and delayed the recrystallization of the V-containing steel. The V-containing steel exhibited primary planar slip but deformation twins were also observed in some austenite grains due to its decreased stacking fault energy. This study thus offers a potential strategy to significantly improve the yield strength of low-density steels through a suitable addition of V and corresponding simple annealing treatment.