The process of recrystallization annealingaffects grain size and morphology, and thus, plays a vital role in tailoring the mechanical properties of the air-hardening steel LH800. In this paper, we investigated the recrystallization behavior, microstructure evolution, and mechanical properties of cold-rolled LH800 steel during the batch annealing process. We also studied the relationship between the recrystallization behavior and the microstructure as well as the mechanical properties, in obtaining air-hardening steel with good cold formability. The results show that when annealing at 700 C with extended holding time, the cold-rolled deformed structure recrystallizes gradually, a large number of nanoscale carbides are formed and dispersed in the matrix, and the bimodal microstructure of the coarse and fine grain ferrite is distributed in lamellae along the rolling direction. With an increase in holding time, the volume fraction of nano carbide decreases, bimodal structure disappears gradually, and the ferrite grain size tends to be uniform. The air-hardening steel LH800 has lower yield strength, highest elongation, and best cold forming performance when annealed at 700 C for 4 h. The essence of the yield point elongation of the LH800 during tensile testing is revealed, based on the evolution of recrystallized microstructure and the change of nano-scale carbides in the ferrite matrix during the annealing process.