A detailed analysis of the evolution of industrial Dual Phase (DP) steel microstructures is carried out as a function of various annealing and tempering conditions. Advanced characterization techniques such as Parallel Electron Energy Loss Spectroscopy (PEELS) in the TEM and high spatial resolution Secondary Ion Mass Spectrometry (NanoSIMS) are employed in order to provide qualitative and quantitative measurements of local carbon concentration in the martensite. For certain annealing and tempering conditions, it is observed that local variations in carbon levels have occurred inside the individual martensite islands. These carbon variations strongly influence the damage behaviour of the steel. During tensile tests, a clear dependence of the damage mode on the local martensite carbon content is observed. Better knowledge of the relationship between the microstructure evolution at the sub-grain level and the damage behaviour can facilitate the design of DP steels with improved damage resistance.