This work presents the results of prior austenite state on the phase transformation behavior in a medium manganese steel alloyed with Al. The austenite was plastically deformed at two different temperatures. The first was at 1050 °C to ensure its recrystallization before cooling. The second treatment included deformation at 900 °C to keep high dislocation density in the austenite. The analysis of recrystallization process or its lack on the phase transformation behavior was analyzed. The study included thermodynamic calculations to analyze proper conditions of selected heat treatments. The dilatometric analysis of the phase transitions dependence on deformation temperatures was carried out. Deformation continuous cooling transformation diagrams were formed on this basis. The metallographic investigations were performed to determine microstructure constituents after cooling. The investigation proved the presence of ferrite untransformed during the austenitization step at 1100 °C. The dominant phase was bainite which was kept present up to 100 °C s−1 cooling rate. The amount of martensite increased with increasing the cooling rate. For the non-recrystallized austenite, more bainite was present in the microstructure for higher cooling rates compared to the recrystallized one. This was the result of higher density of preferable places for bainite nucleation in the non-recrystallized austenite. The Vickers hardness measurements were conducted after the applied heat treatments. The hardness of steel increased together with applying the higher cooling rates, which corresponded to the higher martensite amount. These values were higher for the non-recrystallized austenite because of higher dislocation density.