We study the mechanical behavior of a class of multiphase carbon steels where metastable austenite at room temperature is found in grains dispersed in a ferrite-based matrix. During mechanical loading, the austenite undergoes a displacive phase change and transforms into martensite. This transformation is accommodated by plastic deformations in the surrounding matrix. Experimental results show that the presence of austenite typically enhances the ductility and strength of the steel. We use a recently developed model (Turteltaub and Suiker, 2005) to analyze in detail the contribution of the martensitic transformation to the overall stress-strain response of a specimen containing a single island of austenite embedded in a ferrite-based matrix. Results show that the performance of the material depends strongly on the lattice orientation of the austenite with respect to the loading direction. More importantly, we identify cases in which the presence of austenite can in fact be detrimental in terms of strength, which is relevant information in order to improve the behavior of this class of steels. © 2005 Elsevier Ltd. All rights reserved.