Microstructure evolution during deformation of undercooled austenite at 760℃ was investigated in Nb-microalloyed steel by using SEM (scanning electron microscope), TEM (transmission electron microscope), and EBSD (electron backscattered diffraction). It is indicated that during deformation-enhanced ferrite transformation (DEFT) in Nb-microalloyed steel, the incubation period is prolonged, and the higher strain is needed to accomplish ferrite transformation. Therefore, the transformation kinetics curves move to high strain parallelly; and the transformation kinetics curves of Nb-microalloyed steel can be divided into three stages. At the fast stage, the solute drag effect of Nb and the consumption of strain energy for the dynamic precipitation of Nb(CN) led to a long incubation period, and at the second stage, ferrite transformation was accelerated significantly and fine Nb(CN) precipitates restrict the grain growth of ferrite effectively. The results also showed that DEFT in Nb-microalloyed steel is still a nucleation dominated process, and during the microstructure evolution the interchange of 〈001〉 and 〈111〉 texture was obtained.