A Transformation-Induced Plasticity (TRIP) steel matrix reinforced with magnesium-partially stabilized zirconia (Mg-PSZ) particles depicts a superior energy absorbing capacity during deformation. In this research, the TRIP/TWIP material model already developed in the framework of the Düsseldorf Advanced Material Simulation Kit (DAMASK) is tuned for X8CrMnNi16-6-6 TRIP steel and 10% Mg-PSZ composite. A new method is explained to more accurately tune this material model by comparing the stress/strain, transformation, twinning, and dislocation glide obtained from simulations with respective experimental acoustic emission measurements. The optimized model with slight modification is assigned to the steel matrix in 10% Mg-PSZ composite material. In the simulation model, zirconia particles are assigned elastic properties with a perfect ceramic/matrix interface. Local deformation, transformation, and the twinning behavior of the steel matrix due to quasi-static tensile load were analyzed. The comparison of the simulation results with acoustic emission data shows good correlation and helps correlate acoustic events with physical attributes. The tuned material models are used to run full phase simulations using 2D Electron Backscatter Diffraction (EBSD) data from steel and 10% Mg-PSZ zirconia composites. Form these simulations, dislocation glide, martensitic transformation, stress evolution, and dislocation pinning in different stages of deformation are qualitatively discussed for the steel matrix and ceramic inclusions.