Transmission electron microscopy has been used to study the microstructure of an experimental white cast iran, in which a combination of modified alloy composition and unconventional heat treatment has resulted in a fracture toughness of 40 MPa m(-1/2). Microstructural features of the alloy that contribute to the toughness improvement and hence distinguish it from conventional white irons have been investigated. In the as-cast condition the dendrites are fully austenitic and the eutectic consists of M7C3 carbides and martensite. During heat treatment at 1130 degrees C the austenite is partially destabilized by precipitation of chromium-rich M7C3 carbides. This results in a dendritic microconstituent consisting of bulk retained austenite and secondary carbides which are sheathed with martensite. The martensite sheaths, which contain interlath films of retained austenite, are irregular in shape with some laths extending into the bulk retained austenite. Emphasis has been placed on the morphology, distribution, and stability of the retained austenite and its transformation products in the dendrites. The implications of these findings on the transformation toughening mechanism in this alloy are discussed.