The effect of austenite grain size on martensitic transformation, particularly with regard to martensite structure, Ms/Mf temperatures, and mechanical properties was investigated in 0.1C–5Mn martensitic steel. Utilizing a newly developed experimental technique that makes it possible to examine phase transformation behavior and conduct tensile testing with the same specimen, we examined these relationships and obtained the following results. Ms temperature decreases as much as 40 K with a decrease in austenite grain size from 254 to 30 μm. Regarding martensite structure, the packet size and the block length decrease, while the lath width does not change, with the refinement of austenite grain size by about one tenth. Grain boundary density, especially high-angle grain boundary density, increases with decreasing austenite grain size. Tensile strength slightly increases though austenite grain size decreases about one tenth. However, reduction in area significantly improves particularly at refined grain sizes of 30 μm. True stress - true strain curves obtained up to fracture elucidates that the austenite refinement substantially improves true fracture strength and greatly increases true fracture strain of martensite, potentially invalidating the conventional concept of a trade-off between strength and ductility. Low C–5Mn martensitic steel produced from fine austenite shows a great possibility having an excellent total balance of strength, ductility and toughness.