Abstract We examine the effect of transformation sequence on the microstructure evolution and mechanical properties of complex phase steel consisting of bainite and martensite. Formation of martensite prior to bainite transformation provides uniform lath-type mixture of constituent phases, but preceding isothermal bainite transformation produces carbon-enriched blocky martensite embedded in the bainite. Even though the presence of carbon-enriched blocky martensite increases the strength of the alloy more effectively, the impact toughness is significantly deteriorated with a small fraction of martensite. On the other hand, uniform lath-type mixture of martensite and bainite provides moderate decreased or conserved impact toughness at martensite fraction up to 70%, which be considered as an exceedingly beneficial option to enhance the strength of complex phase steel without compromising impact toughness.