The laser powder bed fusion (LPBF) technology has been involved in the tooling industry to produce tools with complex geometry and integrated functions. However, tool steels with high carbon content tend to crack due to the thermal stresses during the LPBF process. One solution is increasing the powder bed temperature to avoid large thermal gradients. In the present study, the influence of the preheating temperature on microstructure and corresponding hardness is systematically investigated. With the help of time–temperature–transformation diagram, the phase evolution during the LPBF process is systematically explained. AISI M50 samples are produced by LPBF from room temperature to a preheating temperature of 650 °C. Higher preheating temperatures shift the optimal laser parameter window to lower volume energy densities. A cellular/dendritic microstructure formed during the rapid solidification with retained austenite is located at the interdendritic regions. Moreover, a high preheating temperature reduces the retained austenite fraction, specifically from 39% without preheating to 7.6% at 650 °C preheating temperature.