Industrial low alloy TRIP sheet steels contain blocky and lath-shaped retained austenite. In the present study, transformation behaviour of blocky and lath-shaped retained austenite during straining was investigated to clarify its effect on mechanical properties. Two types of TRIP steels containing almost the same amount but the different morphology of retained austenite were used. A steel containing large amount of lath-shaped retained austenite exhibits superior ductility, and sustains high work-hardenability in a high strain region. On the contrast, a steel containing large amount of blocky retained austenite exhibits low ductility. The work-hardenability increased steeply to the maximum at a low strain region, and then reduced in a high strain region. The stability of the blocky austenite has been found to be poor with respected to martensite transformation. The lath-shaped retained austenite remains until a high strain region whereas the blocky retained austenite transformed into martensite in a low strain region. Carbon content was higher in the lath-shaped retained austenite than in the blocky retained austenite. Stability of retained austenite is, however, inexplicable only by the carbon content, and would be affected by the different morphology and the resulting restraint conditions.