The strategy that replacing part of MnS with BN was proposed in order to decrease the sulfur content in sulfur based free-cutting steel. The effects of BN and MnS inclusions on the microstructure and machinability of the steel were systematically investigated. The results show that most of the BN and MnS inclusions exist individually in the steel and only a small amount of them are in a composite state forming either isolated particles or clusters of particles. In the case of multi-phased steel, the theoretical calculation predicts that the volume of large BN particles should be 0.7 times of the volume of large MnS particles. The machinability of this type of BN and MnS alloy steel over a wide range of cutting speeds ranging from a low speed appropriate for drilling to a high speed appropriate for turning is confirmed as being equal to or superior to that of an MnS reference steel, even though the sulfur content in the composite steel is only half that of the MnS steel. The aptitude for cutting effect of 240 ppm nitrogen and 115 ppm boron in the composite steel is demonstrated to be equivalent or even better than 1000 ppm sulfur in MnS free-cutting steel.