Medium-Mn automotive sheet steels require optimized heat-treatment processes to obtain benefits caused by strain-induced martensitic transformation of retained austenite (RA) during sheet metal forming or crash events. The intercritical annealing (IA) approach at different temperatures in a range of 640 °C to 800 °C is proposed in the study for a 5Mn hot-rolled medium-Mn sheet steel. The experiments were performed in terms of dilatometry. The analysis of the cooling curves allowed development of a new method for calculating the high-temperature phase equilibrium. The calculations were validated by modeling with JMatPro and experimentally verified by X-ray diffraction (XRD). The microstructure evolution was characterized using light optical microscopy and scanning electron microscopy (SEM), including electron backscatter diffraction (EBSD). The quantitative determination of the fraction, morphology, chemical composition, and stability of the RA was done. Mechanical properties were determined by hardness measurements. The research showed a substantial influence of the IA temperature on the RA fraction and chemical stability and properties of medium-Mn Al-alloyed steel. At temperatures of 680 °C and 700 °C, the largest fraction of over 35 pct of stable RA was obtained, which does not transform to martensite during cooling.