Multilayered composite steels consisting of alternating layers of martensitic phase and austenitic phase exhibit an excellent combination of strength and elongation compared with conventional advanced high-strength steels. The deformation processes underlying these properties are of considerable interest. In this article, microstructure, grain size, and phase are characterized by scanning electron microscopy (SEM) and electron backscattering diffraction. The hardness of each layer is analyzed by a microindentation hardness testing system. Finally, the deformation and failure processes in multilayered steel are investigated by in-situ SEM. The hardness results indicate that various hardening modes occur in the soft austenitic layer and the hard martensitic layer. In-situ SEM results combined with microstructure analysis and hardness results reveal that annealing temperature and annealing time have a significant impact on final microstructure, fracture behavior, strength, hardness, and ductility.