Fast-heating annealing method provides a new possibility to produce high-performance dual-phase (DP) steel by controlling austenite decomposition upon cooling. A quenching dilatometer with programmable heating-holding-cooling cycles was employed to stimulate the fast-heating annealing process of a cold-rolled dual-phase steel in the present work. Electron probe microanalysis and X-ray diffraction were conducted to reveal the microstructural evolution and phase transformation behavior in combination with dilatometric measurements. Experimental results showed that in case the cold-rolled DP980 steel sheet was rapidly austenitized just above the full austenitization temperature at a heating rate of 300 K/s, ultrafine and discontinuous martensite surrounded by interconnected network ferrite could be obtained after holding at 1073 K for 100 s. A phase transformation model was established for the cold-rolled dual-phase steel subjected to fast-heating annealing treatment. The produced fast-heating DP980 steel sheet possessed an ultimate tensile strength of about 1200 MPa and a fracture elongation up to 16.7%.