Recently, the retained austenite (RA) with chemically heterogeneous has attracted great attention in medium Mn steel. In this work, we designed a two-step intercritical annealing (TIA) heat treatment process to prepare high-strength medium Mn steel with the chemical composition of Fe–0.20C–8.0Mn–1.6Si–1.3Al (wt.%). Compared with the normal intercritical annealing (IA) heat treatment process, the TIA process can not only increase the volume fraction of RA but also obtain the RA with inhomogeneous Mn distribution. Meanwhile, it was found that the Mn content on the outer side of this structured RA was higher than that on the inner side, forming a nanoscale Mn-enriched layer on the outer side of RA, which played a significant role in improving the stability of RA. Finally, we used the TIA process to obtain medium Mn steel with an ultimate tensile strength (UTS) of 1611.83 MPa, a total elongation (TE) of 45.02%, and a product of strength and elongation (PSE) of 72.56 GPa·%, which achieves a superior combination of high strength and high ductility in medium Mn steel.