Microstructures formed by degenerate pearlite transformation in an Fe-0.38mass%C alloy were studied by means of scanning electron microscopy (SEM) and transmission electron microscopy (TEM). Degenerate pearlite which contains fine cementite particles even at the growth front was observed with other structures such as proeutectoid ferrite, lamellar pearlite and bainite in a temperature range between 773K and 923K. As the isothermal transformation temperature is lowered, a fraction of the degenerate pearlite increases. The degenerate pearlite consists of 'block' (a region in which ferrite orientations are nearly the same) and 'colony' (a region containing cementite particles of nearly the same orientation), both of which are similar to those in lamellar pearlite. Block boundaries within an austenite grain are generally of high-angle type and their misorientations deviate largely from intervariant relationships for the K-S orientation relationship. In contrast, colony boundaries are of low-angle type. Cementite films are formed along those ferrite boundaries in the degenerate pearlite, presumably formed by encounter of the blocks or colonies.