The effect of microstructure on flow and fracture properties of fully pearlitic steel has been studied by independently varying the prior austenite grain size and the pearlite interlamellar spacing through appropriate heat treatments. The yield strength is independent of the prior austenite grain size but increases as the interlamellar spacing or the temperature decreases. The microstructural dependence can be explained by using a model which assumes that yielding is controlled by dislocation motion in the ferrite lamellae. The critical tensile stress for cleavage fracture is found to be independent of prior austenite grain size, increasing as the interlamellar spacing decreases. The cleavage fracture stress is independent of temperature for fine pearlite but increases as the temperature decreases for coarse pearlite. The associated fracture in blunt notch specimens initiates at inclusions beneath notch surface near the location of maximum tensile stress. From the size of such inclusions, the effective surface energy for cleavage fracture can be directly calculated and is found to be independent of temperature and prior austenite grain size but to increase as the interlamellar spacing decreases, from about 5 to 13 J/m2 for the range of microstructures and temperatures used in this study. Additional measurements of the effective surface energy and further theoretical analyses of the cleavage process are needed.