A transmission electron microscope was used to study the morphology of austenite and ferrite in austempered ductile iron obtained through conventional and two-step austempering process. In this investigation, two compositions of ductile iron with carbon equivalent 4.3% (alloy 1) and 3.1% (alloy 2) were selected. Both alloys were austenitized for 60 min at 900 °C. In conventional treatment, after austenitization, specimens were quenched into salt bath at 400 °C and austempered for 120 min. In two-step process, first specimens were quenched into salt bath at 250 °C and then temperature was raised to 400 °C and specimen was austempered for 120 min. The TEM study showed lamellar arrangement of ferrite and austenite in both the austempering processes. The width of the ferrite and austenite lamina was found to be smaller in specimen austempered by two-step process than by conventional austempering process.