• Lüders band formation is limited to 1.5% strain due to early transformation of less stable large retained austenite, enhancing strain hardening and delaying yielding.
• Small-sized retained austenite exhibits high stability, progressively transforming to martensite and sustaining a stable Portevin–Le Chatelier effect, contributing to extended ductility.
• The volume fraction of retained austenite decreases from 26.8% to 8.2% before fracture, indicating progressive TRIP effect throughout deformation.
• Fracture initiation in late deformation occurs primarily at austenite/martensite and ferrite/martensite interfaces and within ferrite, providing insights for damage-resistant steel design.