The gradient fine grains on low-carbon steel surface were produced via ultrasonic impact treatment, which led to excellent combination of high strength and ductility. Results showed that the grain size had a gradient increasing from 120 nm at top surface to 5–8μm at the matrix. In the gradient fine grain region, the grain boundary misorientation is in the range of 2–15°. Compared with original microstructure, the surface gradient fine grains can achieve a higher work hardening rate. A digital image correlation(DIC) technology was employed to analyze variations in strain during the tensile deformation. It is demonstrated that the surface gradient distribution of grain size can reduce the stress concentration, resulting in higher ability for uniform deformation. Such a capability is attributed to the decreased dislocation density and Schimid factor due to gradient fine grains distribution. Compared with the original microstructure, a number of dislocation walls (or cells, or tangles) can hinder the movement of dislocations. In addition, the surface gradient fine grains have faster recovery and proliferation of mobile dislocation density, which can lead to higher work-hardening ability. As a result, the surface gradient fine grains can attain a combination of excellent strength and ductility.