The effect of rare earth (RE) on microstructure and impact toughness of hot rolled low carbon structure steel based on the Compact strip production (CSP) process was investigated in this work. Scan electron microscope (SEM) were employed to characterize the microstructure and analyze the fracture surface. Moreover, hot compression experiments were also adopted on the Gleeble-1500 hot simulator as well. The results indicate that acicular ferrite and/or ultrafine ferrite morphologies can be induced when an appropriate amount of rare earth added into the low carbon steel, which possessed the satisfied strength and toughness behaviors. Compared with commercial low carbon structural steels, the additions of RE can improve dynamic recrystallization critical strain of low carbon structural steel as well. In addition, the role of RE on the formation of these acicular ferrite morphologies has been investigated.