This chapter describes how the phases are arranged into desired microstructures during the heat treatment of tool steels. It describes the microstructural changes that are the objectives of the austenitizing, quenching, and tempering steps of tool steel hardening. The chapter covers austenite composition, retained austenite, and austenite grain size and grain growth. It provides information on the hardness and hardenability of tool steel. The chapter reviews some of these concepts and describes the microstructural appearance of the products of diffusion-controlled transformation of austenite. The role that diffusion-controlled phase transformations play relative to the hardenability of high-carbon and alloy tool steels is then emphasized. It presents general considerations of transformation diagrams, Jominy curves, and the hardenability of tool steels. The factors related to the kinetics and stabilization of martensite transformation are also covered. It briefly reviews selected aspects of the changes that evolve during tempering.