The current research in microalloyed steel has witnessed a continuous improvement in strength-ductility combination. The intention is to reduce the gauge thickness of automotive body sheets without compromising formability, thereby enhancing fuel efficiency. In this light, the present work has devised a novel thermomechanical controlled processing (TMCP) for a low-carbon automotive-grade (Nb+V)-stabilized microalloyed steel. The microstructural modification by TMCP has resulted in an excellent combination of yield strength (782 MPa), ultimate tensile strength (1059 MPa) and ductility (21%). The critical factor translating the investigated alloy towards advanced high strength steel is the ferrite grain refinement by dynamic recrystallization (DRX) and deformation-induced ferrite transformation (DIFT). The DRX predominated during TMCP at the intercritical temperature domain of 800–700 °C, imparting the average recrystallized grain size of 2 ± 0.8 µm. In contrast, the DIFT starts well above the upper intercritical temperature regime (i.e., around 810 °C), but it contributes less to the ferrite grain refinement. The thermodynamic reason has been analyzed keeping in view the changes in grain boundary energy and dislocation energy. The plastic deformation additionally leads to precipitation of cubic (Nb, V)-rich carbides in ferrite. The incoherency, coarse precipitate size (70–80 nm), and a poor phase fraction (⁓0.5%) are the key factors that the strengthening mechanism is governed by ferrite grain refinement majorly, followed by dislocation and solid solution strengthening. The segregation of Mn, Nb and S leads to MnS-type inclusion formation, which acts as potential sites for crack initiation due to plasticity mismatch with ferrite matrix during the tensile deformation.