To clarify the effect of sulfur on inclusions and mechanical properties of Ce-Mg treated resulfurized SCr420H steel. Laboratory experiments were conducted to prepare steels with sulfur contents as 0.01%, 0.06%, and 0.132%. Inclusion evolution in liquid steel, MnS precipitation during solidification, and tensile test results of steel after quenching and tempering were investigated. The results showed that due to the limitation of mass transfer in molten steel, composite inclusion that Ce-O-S wrapped by Ce-Ca-Mg-Al-Si-O, which was named transition state inclusions, can form quickly after adding Ce-Mg lump to the molten steel. As the homogenization of molten steel, the difference of sulfur content in steel can lead to the transition state inclusions transformed into different inclusions. With the increase of sulfur content, the quantity of MnS increased significantly, and the morphology of MnS transformed from “stick” to “dendritic + fishbone”, and then to “fishbone”. Tensile test results and fracture analysis indicate that the decline of inclusion spacing as the increase of sulfur content leads to a shorter physical path of crack propagation in steel. Therefore, the increase of sulfur content can bring about a decrease in the strength and plasticity of the steel. From the perspective of inclusion control, making the MnS inclusion precipitate more dispersive and increasing the distance between inclusions can be considered as a method for preventing the decline of mechanical properties in steel with high sulfur content.