The hot deformation and microstructure characteristics of a novel austenitic heat-resistant steel were investigated based on isothermal compression tests. A strain-compensated modified constitutive model is established, which is capable to accurately predict the flow behaviors of the steel. A kinetic model is established to predict dynamic recrystallization volume fraction. The fraction of dynamic recrystallization increases with increasing the deformation temperature, and decreases with the increase in the strain rate. The volume fraction of dynamic recrystallization is close to 100% at the strain rates of 0.01 s−1 and 0.1 s−1 at 1150 °C. The size of dynamic recrystallized grains increases with the increase in the deformation temperature. The recrystallized grain size decreases with increasing the strain rate up to 1 s−1, whereas an opposite trend is exhibited when the strain rate is greater than 1 s−1. Hot deformation induced the precipitation of fine NbC (at deformation temperature of 950–1150 °C) and Fe2Nb-type Laves phase (deformation temperature ≤ 1000 °C) particles at the grain boundaries and dislocations in the designed austenitic heat-resistant steel. The dynamic recrystallization is hindered because of the pinning role of fine Fe2Nb-type Laves phase and NbC precipitates on the dislocations and grain boundaries. Hot processing maps of the austenitic heat-resistant steel were constructed, and the optimal processing parameters were determined as 1100–1150 °C / 0.01–0.1 s−1.