The microstructural phases in steel influence the magnetic moments due to different alignments and arrangements of the atoms in the crystal lattice. This study is based on the relationship of the microstructural phases with saturation magnetization (MS), a characteristic magnetic property of a phase in a material. Understanding the changes in microstructural phases during steel processing is paramount for different industries to fulfill the desired mechanical properties of the grade. The current research investigates the microstructural phases and magnetic properties of industrial‐grade high‐carbon steel under compressive and controlled‐thermal deformation to obtain a dual‐phase steel microstructure, i.e., retained austenite and martensite. High‐carbon steel samples are subjected to compression and heat treatments, resulting in different variations of dual‐phase structure. The sample microstructure is characterised using optical microscopy, and scanning electron microscopic analyses, and their phases are quantified using X‐ray diffraction, complemented by electron back‐scatter diffraction techniques. An empirical relationship between the microstructural phases of steel and the magnetic characteristics is derived based on the magnetic measurements determined using a SQUID magnetometer. The correlation statistically holds good for high‐carbon steels. This relationship between the volume of transformation of retained austenite (VRA) to martensite (VM) and the magnetic properties is successful in investigating the possibility of a non‐destructive method for evaluating dual‐phase low‐alloyed high‐carbon steels.