The relationship between process, microstructure and properties of cold rolled medium manganese transformation induced plasticity steel Fe-0.2C-7Mn is investigated in this study. Pre-water quenching (WQ) was applied before traditional intercritical annealing (IA) to adjust the microstructure and properties of the steel. The results show that compared with the traditional IA case, the WQ+IA specimen presents a lamellar microstructure other than equiaxed, shows relative fine grain size, low degree of recrystallization and high dislocation density. The evolution of microstructure leads to an optimum Product of Tensile strength and Elongation (PTE) of up to 42GPa·% (for the WQ+IA630-4h specimen: IA at 630℃ for 4h). The Lüders bands phenomenon is completely eliminated, and Portevine-Le Chatelier (PLC) bands are effectively restrained. Digital image correlation(DIC) technique, electron backscatter diffraction (EBSD) and nanohardness analyses confirm that the mobile dislocation density in ferrite phase in the WQ+IA specimen is high, so it is much easier to occur plastic deformation and continuous yielding. Subsequently, Lüders strain phenomenon disappears during the tensile deformation process.