The evolution of the phases in galvanneal coatings on IF and IFP steel sheets is studied by combining optical microscopy (OM), scanning electron microscopy (SEM) with X-ray microanalysis (EDS) and transmission electron microscopy (TEM). The early stage of galvannealing is dominated by the formation of intermetallic compounds, particularly δ phase by constitutional supercooling except the region near the steel substrate where rapid formation of a thin alloy layer, the nature of which depends strongly on surface segregation of minor elements such as phophorus in a steel substrate. The Γ phase, which shows a well-defined columnar structure, grows at the expense of the Γ₁ phase. The thickness of the Γ₁ phase decreases, while maintaining the total thickness of (Γ+Γ₁) constant, 2 μm, during galvannealing, Three different grain morphologies of δ phase have been observed. The surface segregation of phosphorus in steel was found to promote the nucleation of the Γ₁ phase at the solid-liquid interface in the very beginning of galvannealing. The formation of the Γ phase was retarded accordingly. The hot-dip simulator was found to reproduce the microstructures of galvanneal coatings obtained by the in-line production and to facilitate the investigation of the phase evolution during hot-dip galvanizing and galvannealing.