A number of annealing cycles were investigated in an attempt to find the optimum cycle that results in an attractive combination of mechanical and formability properties of an extra deep drawing (EDD) quality steel. It was found that the cycle that involved an intermediate anneal at 600 °C followed by further soaking at 700 °C resulted in the best combination of mechanical and formability properties. It was also found that the rate of heating up to 600 °C can be kept at 50 °C/h while the heating has to be done at a rate of 30 °C/h from 600 °C to the final annealing temperature of 700 °C. The desirable combination of mechanical and formability properties has been correlated with the microstructure that shows pancaking of the annealed grains accompanied by precipitation of carbides. Precipitates of carbides are more in number and smaller in size in the case of samples annealed by the cycle mentioned above compared to the ones annealed by other cycles. They are spherical in shape, which is desirable for forming applications.