Laser surface treatments offer interesting prospects for the creation of architectured microstructures formed by distinct phases in metastable austenitic steels. In the present study, a laser-based localised heat treatment was developed to locally create an austenitic region in a quenched Fe25Ni0.2C martensitic microstructure. The highly localised laser heat flux gives rise to high spatial gradients in peak temperature and heating rate. This results in strong variations in the microstructures observed over short distances, which are related to local changes in the martensite to austenite phase transformation temperatures and formation mechanisms, the occurrence of grain growth and recrystallization in the newly formed austenite, and the tempering of the initial martensite. Moreover, thermal stresses and surface effects influence the final microstructure. In this work, effects of heating rates and peak temperatures are studied by dilatometry whereas Electron Backscatter Diffraction (EBSD) and optical microscopy are used to assess austenite grain size and morphology. This information is linked to a Finite Element Model of the local thermal history to investigate the evolution of the local microstructure throughout the zone affected by the laser heat source. This research provides insight into localised microstructural control of steels with laser surface treatment and provides a thermal model for detailed understanding of the mechanisms controlling the microstructural changes taking place during these treatments.