A 0.1%C-1.35%Mn-0.03%Nb steel was hot rolled in a single pass up to 83% reduction in thickness at a temperature between 790°C and 1 050°C and the deformation state of austenite was examined metallographically in detail. It was found that annealing twins were formed abundantly in the austenite during heating before rolling, or during recrystallization in a high temperature. Rolling at a temperature below the recrystallization temperature of austenite resulted in a severe deformation of these annealing twins. At the same time, a heavy local deformation was introduced into the regions near boundaries of these annealing twins, and also near austenite grain boundaries. Such a local concentration of deformation was found to enhance the formation of ferrite nuclei in these regions during the subsequent ferrite-pearlite transformation. It was suggested that this effect was most essential in the grain refinement of control-rolled steel.