In this paper, the nucleation and growth of austenite are controlled through a two-step annealing process to achieve multi-scale distribution and content increase of retained austenite in low manganese series medium-Mn steel. Combining SEM, EBSD, AES, and other experimental equipment, the evolution rules of the microstructure, properties, and element distribution behavior of the test steel during the annealing process are studied. Compared with one-step annealing, the two-step annealing significantly broadens the size distribution range of retained austenite. In the first step, after annealing at a higher intercritical temperature (760 °C), the ferrite and the M/A island are obtained, completing the initial partition of Mn and the refinement of microstructures. During the second step of annealing (720 °C), the primary Mn-rich martensite region provides higher nucleation driving force and finer dispersed nucleation sites, promoting the nucleation and growth of reverse transformation austenite. At the same time, the metastable-retained austenite formed after the first step of annealing continues to grow through interface movement. Furthermore, a high proportion (23.4%) of retained austenite with multi-scale distribution is formed in the final microstructure, and the product of strength and elongation increased from 21.8 GPa·% by the one-step annealing process to 30.1 GPa·%.