The martensitic transformation in a Fe–C–Mn–Si bainitic steel was examined by in situ high-temperature laser scanning confocal microscopy (LSCM) and dilatometry. The phenomenon of continuous martensitic transformation during austempering was firstly dynamically observed by LSCM. Differing from the commonly accepted viewpoint on martensite formation in bainitic steels, the martensitic transformation in the conventional medium-carbon bainitic steel was not instantaneous and proceeded gradually when the sample was austempered below martensite starting temperature (MS). It can be attributed to the generation of internal stresses, thermal activation, stimulating nucleation, and the segregation of Mn. In addition, apart from the continuous martensitic transformation, the bainitic transformation was also directly observed by LSCM during austempering below MS. Moreover, it was clear from the results of dilatation during austempering that the inflection point in the dilatation curve against time was not the demarcation point between martensitic and bainitic transformation, and in situ observations confirmed that martensite was still formed after the inflection point. Therefore, the obtained results could be an excellent reference to further understand the mechanism of bainitic and martensitic transformations in Fe–C–Mn–Si bainitic steel during austempering below MS.