By means of stress relaxation and strain-induced precipitation in deformed austenite, bainite with micron sheaves size was obtained in Nb-containing steel. Microstructures of deformed samples isothermally relaxed for various time followed by cooling in water were examined. Stress relaxation test and transmission electron microscopy (TEM) were employed to detect precipitation of microalloy elements, such as Nb, Ti, during isothermal holding after deformation. All the samples were constituted by lath-like bainite along with acicular ferrite, but the size of bainitic sheaves and the amount of acicular ferrite were changed with relaxation time. To achieve optimum refinement, relaxation should be confined in the stage when the precipitates have sufficiently grown and started to coarsen. The sample having not undergone relaxation does not exhibit obvious refinement despite of its higher dislocation density. These results indicate that relaxation promotes bainite to refine, which is because deformed austenitic grains are divided by dislocation walls formed during relaxation and acicular ferrite formed before bainitic transformation.