The strengthening mechanism responsible for the unique combination of ultimate tensile strength and elongation in a multiphase Fe-0.2C-1.5Mn-1.2Si-0.3Mo-0.6Al-0.02Nb (wt%) steel was studied. The microstructures with different volume fractions of polygonal ferrite, bainite and retained austenite were simulated by controlled thermomechanical processing. The interrupted tensile test was used to study the bainitic ferrite, retained austenite and polygonal ferrite behaviour as a function of plastic strain. X-ray analysis was used to characterise the volume fraction and carbon content of retained austenite. Transmission electron microscopy was utilised to analyse the effect of bainitic ferrite morphology on the strain induced transformation of retained austenite and retained austenite twinning as a function of strain in the bulk material. The study has shown that the austenite twinning mechanism is more preferable than the transformation induced plasticity (TRIP) mechanism during the early stages of deformation for a microstructure containing 15% polygonal ferrite, while the transformation induced plasticity effect is the main mechanism when there is 50% of polygonal ferrite in the microstructure. The bainitic ferrite morphology affects the deformation mode of retained austenite during straining. The polygonal ferrite behaviour during straining depends on dislocation substructure formed due to the deformation and the additional mobile dislocations caused by the TRIP effect. Operation of TRIP or twinning mechanisms depends not only on the chemical and mechanical stability of retained austenite, but also on the interaction of the phases during straining.