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This study is concerned with a correlation between the microstructure and mechanical properties of 42CrMo4 steel which was subjected quenched-tempered and step-quenching heat treatment. Quench tempering and step quenching heat treatment produced a tempered martensite and an equiaxed Ferrite-Bainite-Martensite (F-B-M) microstructure, respectively. Tensile test results indicated a yield drop effect in F-B-M microstructure with ferritic matrix. This effect was not observed on the specimens with tempered martensite and F-B-M microstructure with hard phase B-M matrix. This effect can be attributed to dislocation generation in ferrite phase during bainitic and martensitic transformations. Fractographic investigations indicated intergranular cleavage in F-B-M microstructure and micro-void coalescence in tempered martensite microstructure can be attributed to carbide formation in martensitic structure during tempering micro-void coalescence in tempered martensite microstructure