ABSTRACTWe describe here the microstructural evolution during simulation of welding thermal cycles in novel Fe–Mn–Ni cryogenic steel and elucidate the mechanism of cryogenic toughness. The original microstructure was tempered martensite and ∼10% retained austenite. Electron backscattered diffraction indicated that the frequency of large-angle boundaries with misorientation >15° was similar at peak temperatures of 1320, 870 and 760°C. The volume fraction of retained austenite determined by X-ray diffraction was ∼11% at 760°C, 9% at 870°C and 1% at 1320°C. Retained austenite was film-like near the bainite lath, and it was enriched with Mn and Ni at peak temperatures of 760 and 870°C. The enrichment with Mn and Ni stabilised the austenite and softened the bainitic matrix. The higher volume fraction of stable retained austenite was the dominant factor responsible for superior cryogenic toughness at the peak temperature of 760°C.