The influence of vanadium and nitrogen on microstructure and mechanical properties of medium-carbon steels has been studied by means of metallography and mechanical testing. Vanadium addition to the low nitrogen steel suppresses the formation of ferrite-pearlite following the low reheating temperatures and microstructure consists of bainitic sheaves. Increasing nitrogen at the same vanadium level promotes the acicular ferrite formation. For high reheating temperatures, dominantly acicular ferrite structure in both the low nitrogen and the high nitrogen vanadium steels is obtained. The results suggest that vanadium in solid solution promotes the formation of bainite, whereas the effect of nitrogen is related to the precipitation of VN particles in austenite with high potency for intragranular nucleation of acicular ferrite and to the precipitation of V(C,N) particles in ferrite with high potency for precipitation strengthening. Addition of both vanadium and nitrogen considerably increases the strength level, while CVN20 impact energy increases on changing the microstructure from bainitic ferrite to the fine ferrite-pearlite and acicular ferrite.