The exceptional high hardness of lath martensite in quenched Fe-C steels is explained by the Engel-Brewer valence electron theory for crystal structures. The theory predicts the transformation sequence FCC-HCP-BCC with FCC iron as Fe3v, HCP iron as Fe2v, BCC iron as Fe1v and carbon as C4v. Electronic compatibility requires transformation from FCC to HCP to form two separate components. Carbon-rich clusters of C4v with 8 Fe3v atoms are distributed uniformly in a carbon-free matrix of HCP Fe2v atoms. The carbon-iron clusters are viewed as particle-like, calculated as 0.63 nm in size, and is responsible for the high strength of martensite. The carbon-free region experiences shear deformation during FCC to HCP transformation leading to work hardened fine grains. Subsequent transformation to BCC iron maintains the same size carbon cluster with additional shearing deformation during HCP to BCC formation in the carbon-free region. Tempering studies of quenched martensite are shown to support the carbon-iron cluster model.