Plates of 1.5 mm in thickness of a model dual-phase steel 0.16C-1.38Si-3.2Mn was prepared by complex processes of rolling and annealing. The mechanical property and work hardening behavior of the steel after annealing were examined. The microstructure and fracture morphology of the steel were characterized by scanning electronic microscopy (SEM), transmission electron microscopy (TEM) and electron backscattered diffraction (EBSD) techniques with emphasis on the strengthen-toughening mechanism of grain refinement of the steel. The results show that the microstructure of the steel annealed at 800℃ consists of ferrite (8.8%) and tempered martensite (91.2%). The annealed steel exhibits good comprehensive performance: the yield strength of 873 MPa with characteristics of continuous yield, tensile strength of 1483 MPa, total elongation of 11% and yield ratio of 0.58. The factors such as the manganese content of the steel, the initial microstructure before annealing, the large deformation of cold rolling and the key parameters of annealing process are all conductive to the grain refining of the steel, as a result the size of ferrite phases is about 1-2 μm and the effective size of martensite bundles is 0.2-1.5 μm. The refined grains may play an important role in blocking the movement of dislocation and increase the resistance to crack propagation thereby enhance the strength, toughness and ductility of the steel sheet.