Microstructural refinement leads to enhancement in strength and wear resistance in pearlite. However, a decrease in lamellar thickness has been found to decrease the toughness with a reduction in spacing till a spacing of around 100 nm but an enhancement in toughness once the spacing is reduced further. Moreover, the impact toughness and fatigue crack growth life also improve with a decrease in spacing in pearlite. The current talk aims to explain why a decrease in lamellar spacing in a bulk pearlitic steels is beneficial to strength as well as toughness. A transition in predominance in deformation mechanism happens from dislocation driven to fiber shear loading as will be shown through in-situ SEM studies. Moreover, the extreme plasticity of cementite once its size is reduced and the temperature is raised to about 100 degrees Celsius will also be demonstrated.