The development of duplex microstructures consisting of very fine ferrite grains and spheroidized cementite particles during concurrent hot deformation has been investigated by hot torsion in a eutectoid steel. It is shown that the hot deformation of the undercooled austenite at temperatures close to Ar1 induces and accelerates significantly the γ-to-pearlite transformation. Further deformation of the transforming pearlite does not lead only to the instantaneous spheroidization of the cementite lamellae but also refines the ferrite orientations units from 15 to 3 µm. Microstructures consisting of very fine ferrite grains (3 µm) and submicron cementite particles are produced at strain levels larger than ε = 1.5. The initial grains undergo progressive fragmentation by the generation of low angle boundaries (LABs) by dynamic recovery that progressively transform into high angle boundaries (HABs). The progressive increase of LABs misorientation is attributed to the presence of cementite particles and is referred to as continuous dynamic recrystallization (cDRX). Fine prior austenite grain size and moderate strain rates are found to promote the occurrence of cDRX. The resulting torsion textures consist of a strong 〈111〉 fiber dominated by the D {112} 〈111〉 component. During the subsequent annealing step, cementite particles coarsen preferentially at the triple junctions whereas the very fine ferrite grain are stable due to the strong pinning effect exerted by the cementite particles.