Subgrain growth in deformed ferrite and incomplete recrystallisation during intercritical annealing in low carbon (LC) steels was investigated by EBSD and FEGTEM/EDS. It was confirmed that fine dual phase (α+γ) microstructures could be obtained even without the addition of microalloying elements such as Nb and Ti, if the steels were heated above Ac1 temperature before the completion of primary recrystallisation and then intercritically annealed. The fine microstructure was found to be mainly due to the inhibition of primary recrystallisation, and also due to the inhibition of subgrain growth in deformed matrix by finely dispersed γ phase formed during heating. Mn segregation at α/γ interfaces seems to indicate that the kinetics of boundary migration in the existence of γ is controlled by the volume diffusion of substitutional alloying elements across the α/γ interfaces.