An interaction between ferrite recrystallization and austenite transformation in low-carbon steel occurs when recrystallization is delayed until the intercritical temperature range by employing high heating rate. The kinetics of recrystallization and transformation is affected by high heating rate and such an interaction. In this study, different levels of strain are applied to low-carbon steel using a severe plastic deformation method. Then, ultra-rapid annealing is performed at different heating rates of 200–1100℃/s and peak temperatures of near critical temperature. Five regimes are proposed to investigate the effects of heating rate, strain, and temperature on the interaction between recrystallization and transformation. The microstructural evolution of severely deformed low-carbon steel after ultra-rapid annealing is investigated based on the proposed regimes. Regarding the intensity and start temperature of the interaction, different microstructures consisting of ferrite and pearlite/martensite are formed. It is found that when the interaction is strong, the microstructure is refined because of the high kinetics of transformation and recrystallization. Moreover, strain shifts an interaction zone to a relatively higher heating rate. Therefore, severely deformed steel should be heated at relatively higher heating rates for it to undergo a strong interaction.