The role of diffusionless α′ to γ transformation on the microstructure evolution and hot ductility of high-nickel steel is investigated. In-situ Auger electron spectroscopy fracture test reveals the correlation of ductility loss and sulfur segregation at the grain boundary. The α′ to γ transformation start temperature is measured by heating the initial α′-martensite at various rates. The transformation temperature remains constant when the heating rate is higher than 15 °C/s. Despite the α′ to γ phase transformation, the diffusionlessly transformed specimen shows a similar γ grain size with the initial prior γ grain size. The γ grain size decreases dramatically after the continuous annealing of the transformed specimen. The temperature-dependent recrystallization behavior and corresponding hot-ductility are evaluated. The improved hot ductility is achieved by active recrystallization at 900–1100 °C. Due to the late recrystallization behavior, the improvement of hot ductility is limited after annealing at 800 °C. The origin of hot ductility loss and enhancement depending on the thermal cycles is discussed by sulfur segregation at the grain boundary and recrystallization behavior after diffusionless transformation.