Zero thermal expansion (ZTE) alloys are not only of great scientific significance, but also of great application value due to their unique dimensional stability, high thermal and electrical conductivities. However, the practical application and further development of ZTE alloys are limited by their inherent brittleness because ZTE and plasticity are generally incompatible in a single material. Besides, ZTE alloy is highly sensitive to composition, so conventional methods such as alloying or the design of multiphase to improve its mechanical properties are inapplicable. In this study, we report a one-step eutectic reaction method to overcome this contradiction: by melting 4 atom% holmium with pure iron to form a natural dual-phase composite. The composite shows unprecedented comprehensive advantages such as moderate plasticity and strength, axial zero thermal expansion, good thermal stability and low cost, making it the first plastic ZTE alloy other than Invar. Through the joint study of synchronous X-ray diffraction, in-situ neutron diffraction and microscopy, the critical role of dual-phase synergy mechanism on both thermal expansion regulation and mechanical property enhancement is revealed. These results indicate that eutectic reaction is likely to be a general and effective method for the design of high-performance intermetallic compound-based ZTE alloys.