A hot forged Fe-0.88?pct C-6.9?pct Al steel was intercritically annealed at temperatures in the range of 1173?K to 1283?K (900?°C to 1010?°C), and subsequently tempered at 623?K (350?°C) to enhance the mechanical properties by microstructure modification. Room temperature compression tests were carried out to evaluate the influence of the intercritical annealing temperature on the mechanical properties. A substructure was present in the microstructure after each intercritical annealing treatment. The substructure was absent after annealing at 1263?K (990?°C) and higher temperatures. Over-aging occurred when the annealing temperature was increased to 1283?K (1010?°C). A remarkable increase in strength and ductility was achieved after annealing at 1263?K (990?°C).