Grain size reduction in single phase alloys generally goes along with a loss of ductility associated to a decrease of the strain hardening capacity. The flow behaviour of fine grained dual phase steels produced by swaging was investigated in order to address the couplings between grain size reduction and incorporation of a second phase, and to optimize microstructures towards different objectives. A physically based grain size dependent strain hardening model has been developed for the ferrite, involving specific laws for the accumulation and saturation of dislocations along grain boundaries and for their net back stress contribution. The back stress increases with the dislocation density, reaches a maximum and finally decreases due to the screening of opposite dislocations located on the other side of the boundary. The overall behaviour of the ferrite – martensite composite is then calculated using a mean field homogenization method. A parametric study provides, for a given carbon content and grain size of the ferrite matrix, the optimum martensite volume fraction leading either to the maximum strength ductility product or to the maximum strength under the constraint of sufficient ductility for forming.