In this study, the effect of tempering on the stretch-flangeability is investigated in 980 MPa grade dual-phase steel consisting of ferrite and martensite phases. During tempering at 300 oC, the strength of ferrite increases due to the pinning of dislocations by carbon atoms released from martensite, while martensite is softened as a consequence of a reduction in its carbon super-saturation. This strength variation results in a considerable increase in yield strength of the steel, without loss of tensile strength. The hole expansion test shows that steel tempered for 20 min (T20 steel) exhibits a higher hole expansion ratio than that of steel without tempering (T0 steel). In T0 steel, severe plastic localization in ferrite causes easy pore formation at the ferrite-martensite interface and subsequent brittle crack propagation through the highly deformed ferrite area during hole expansion testing; this propagation is mainly attributed to the large difference in hardness between ferrite and martensite. When the difference in hardness is not so large (T20 steel), on the other hand, tempered martensite can be considerably deformed together with ferrite, thereby delaying pore formation and hindering crack propagation by crack blunting. Eventually, these different deformation and fracture behaviors contribute to the superior stretch-flangeability of T20 steel.