The microstructures and mechanical properties of the hot-rolled Fe-6.5wt.%Si sheet are analyzed. The microstructure of the hot-rolled sheet is layered along the thickness direction. The surface exhibits fine and equiaxed grains, whereas the center part shows coarse and elongated grains with a <101> fiber texture along the rolling direction. Serrated flow behavior is observed during tensile deformation of both the hot-rolled sheet and its center samples at 350 °C; thus, the serrated flow of the hot-rolled sheet is mainly attributed to the serration of the center part. The analyses of dislocation configurations, ordered structures, and crystal orientation show that the serrated flow behavior results from the interaction of solutes with mobile dislocations. Mobile dislocations are pinned by combining parallel forest dislocations with the pipe diffusion of solution atoms. This study provides a new perspective for the deformation mechanism of the Fe-6.5wt.%Si alloy.