The tungsten–alloyed 10%Cr (mass fraction) steel, one of the advanced 9%—12%Cr steels, has been widely considered as a preferred candidate for making key components in ultra–supercritical (USC) steam turbines. Due to large amounts of ferrite former in the steel, the formation temperature of δ–ferrite is lowered down, and therefore δ–ferrite is apt to be produced during hot working. However, understanding of the formation mechanism of δ–ferrite and its influence on the mechanic properties of ultra–supercritical steels is still either ambiguous or conflicting. To clarify this problem, in this paper, the microstructure and morphology of δ–ferrite were investigated by optical microscope, scanning electron microscope and energy dispersive spectrum (EDS) analysis. Also, the mechanical properties including the tensile strength, ductility and impact toughness of the studied steel with various volume fraction of δ–ferrite were tested at room temperature. Experimental results indicate that the transformation mechanism of δ–ferrite is closely dependent on the austenitizing temperature. Extremely small amounts of acicular δ–ferrite preferentially nucleate and grow inside the prior austenite grains, if the austenitizing temperature is just a little higher than the equilibrium transformation point of δ–ferrite. While, as the austenitizing temperature increases further, some polygonal δ–ferrites subsequently form on prior grain boundaries and grow quickly. Meanwhile, the repartitioning of solute elements occurrs between δ–ferrite and prior austenite. Both acicular and polygonal δ–ferrites will damage the impact toughness of the studied steel. And in spite of its few amounts, the detrimental effect of acicular δ–ferrite on the mechanical properties, especially the impact toughness, is more severe than that of polygonal δ–ferrite. Additionally, the tensile strength and the area reduction of the studied steel decrease as the amount of δ–ferrite increases, while the elongation hardly changes with the amount of δ–ferrite increasing. As a conclusion, accurately controlling the austenitizing temperature to prevent from the formation of any δ–ferrite is not only necessary but also very important in obtaining perfect overall mechanical properties.