Research was conducted to investigate the effects of high-pressure torsion (HPT) and post-deformation annealing (PDA) on the microstructure evolution and mechanical behavior of an Fe-9.6Ni-7.1Mn (at.%) steel with an initial lath martensitic microstructure. The experimental results showed that HPT processing led to the formation of an ultrafine grain martensitic microstructure accompanied by small amounts of strain-induced austenite. Phase analysis and microstructural examination confirmed that during PDA at 600 °C a large fraction of fine and coaxial austenite grains was introduced in the microstructure by diffusionless shear mechanism whereas its volume fraction at ambient temperature was drastically decreased by increasing the annealing time. Also, the grain size was reduced from a value of about 5.2 μm in the solution-treated specimen to ultrafine values of about 570 and 280 nm for the martensite and austenitic phases, respectively, after PDA for 7.2 ks. PDA yielded an outstandingly good combination of an ultimate tensile strength (∼1340 MPa) and fracture strain (∼11.9%) in comparison to the solution-annealed condition which can be attributed to the finer grain size and the presence of shear-formed austenite in the microstructure. In addition, the fracture mode changed from a fully ductile nature in the solution-treated specimen to a combination of ductile and brittle nature after applying the HPT and then returned again to a ductile behavior after PDA.