Recently, medium-Mn steel, used in the automotive industry, has attracted increasing attention as the one of the most promising candidates for the third generation of advanced high strength steels owing to its reasonable cost and excellent mechanical properties. In this study, the effect of intercritical annealing temperature on the microstructure and mechanical properties of a new composition steel was investigated, and its strengthening mechanism and related reasons were analyzed. In addition, a ultra-high product of strength and plasticity (> 70 GPa·%) of hot rolled medium manganese steel with a segregation band was eventually obtained. The results show that the grain size and orientation in the packet (defined by the original austenite grain boundary) significantly affect the mechanical properties and deformation microstructure of the material obtained under different temperatures. The obvious precipitation and dissolution processes of carbides occur at higher temperatures, and thus influence the mechanical stability of reversed austenite. During the tensile process, because it is easier to deform, the favorable packets in the non-segregation zone form an elongated-strip fine-grain zone along the loading direction, while the unfavorable packets form fragmentary grain regions. Moreover, martensite transformation preferentially occurs at the obvious orientation inside the austenite grain and the boundaries where large strain is accumulated. Through coordinated deformation, the adjacent packets eventually tend to form alternate distribution of the two kinds of micro-zone substructures, which is accompanied by the significant evolution of low-angle grain boundaries related to the dislocation activity. Due to the wide distribution of grain size in one packet, the reversed austenite in the non-segregation zone can withstand large deformation, which makes the austenite in the segregation zone undergo sufficient strain-induced martensitic transformation (SIMT), to obtain excellent combination of strength and toughness.