Adiabatic shear bands, obtained in compression deformation at a strain rate of 4000 s -1 , in a pearlitic 1.3%C steel, were investigated. Shear-bands initiated at 55% compression deformation with the width of the band equal to 14 µm. Nano-indentor hardness of the shear band was 11.5 GPa in contrast to the initial matrix hardness of 3.5 GPa. The high strength of the shear band is attributed to its creation from two sequential events. First, large strain deformation, at a high strain rate, accompanied by adiabatic heating, led to phase transformation to austenite. Second, retransformation upon rapid cooling occurred by a divorced eutectoid transformation. The result is a predicted microstructure consisting of nano-size carbide particles within a matrix of fine ferrite grains. It is proposed that the divorced eutectoid transformation occurs in iron-carbon steels during high rate deformation in ball milling, ball drop tests and in commercial wire drawing.