The evolution of the microstructure and mechanical properties in a low-density, low-alloy steel containing 6.57Al-3.34Mn-0.18C (wt.%) has been investigated as a function of processing. The steel was designed to have a duplex microstructure with ferrite as the major phase and austenite as the minor phase within the temperature range 800-1350 °C. The steel was processed to sheet form, which was thermomechanically treated and characterised by a variety of techniques such as optical metallography, scanning electron microscopy, electron backscatter diffraction, electron probe microanalysis, X-ray diffraction, transmission electron microscopy, tensile testing and density and elastic modulus measurements. The amount of austenite was found to decrease with an increase in the annealing temperature. While C and Mn partitioned into the austenite phase, Al partitioned into the ferrite. The tensile elongation increased with an increase in the amount of austenite in the microstructure. However, the austenite showed only a small transformation induced plasticity effect during tensile deformation due to its high stability. After annealing, mostly κ-carbide precipitates with a (Fe + Mn)/Al ratio of 3.6 appeared in the ferrite matrix, along with some cementite and complex carbides. These precipitates became coarser (330 nm) during a short time overageing treatment at 400 °C, causing a significant increase in elongation. The κ-carbides were found to have a close to Nishiyama-Wasserman type orientation relationship with the ferrite matrix. Although the Young's modulus of the steel dropped due to the large amount of Al added, the reduced density was found to be beneficial for automotive applications, overriding the effect of a drop in Young's modulus.