Nowadays, a new concept of process utilizing dynamic ferrite transformation, which can achieve ultrafinegrained structure with a mean grain size of approximately 1 mu m, has been proposed. This paper reports transformation mode of dynamic ferrite transformation and formation mechanism of ultrafine-grained structure revealed by our novel technique of in-situ neutron diffraction analysis during thermomechanical processing. Dynamic ferrite transformation occurs in a diffusional manner, whose partitioning behavior changes from para- to ortho-equilibrium with the progress of transformation. Moreover, we propose that dynamic recrystallization of dynamically-transformed ferrite is the main mechanism for the formation of ultrafine-grained structure. (C) 2019 Acta Materialia Inc. Published by Elsevier Ltd. All rights reserved.