In this work, the effect of cold deformation prior to annealing treatment on the microstructure and magnetic hysteresis energy losses in a low carbon grain non-oriented semi-processed electrical steel with 0.60 mm thickness was investigated. The samples were subjected to different percentages of deformation, in a range of 5–20% reduction and annealed at temperatures between 650 and 950 °C for 60 min, these were characterized by Optical Microscopy. Meanwhile the energy losses were calculated from the magnetic hysteresis loops using a Vibrating Sample Magnetometer. The experimental results showed that cold deformation increases energy losses by 50% when the steel is deformed 20%, due to microstructural defects that are introduced to the material during deformation. The presence of the microstructural defects was verified through measurements of Full Width at Half Maximum by means of X-ray diffraction. On the other hand, it was observed that annealing at temperatures below Ac1 causes only small changes in the microstructure of the steel, however, it promotes the recovery of magnetic properties by 50% with respect to the deformed material. In contrast, when the material is annealed between Ac1 and Ac3 (α+γ) magnetic properties are recovered ~33% with respect to the initial state and, at values higher than 65% compared to the state of greatest deformation (20%), as a result of both microstructural modification and the evolution of the grain size experienced by the material.