The mechanical properties of hardened AISI 52100 bearing steel such as flexural strength, microhardness and Young’s modulus are considerably influenced by the austenite content retained in the microstructure. A microstructure-sensitive finite element simulation approach is presented which considers the effect of retained austenite to estimate the mechanical properties. The austenite grain size is derived as a function of austenitising temperature and holding time using a modified Arrhenius type equation. The simulation strategy involves division of the two-dimensional domain using triangular elements such that a group of six neighbouring triangular elements represented a hexagonal grain of calculated size. Material inhomogeneity is introduced by enforcing austenite properties to a fraction of the elements equal to the volume percent of retained austenite in the steel. The predictions from the simulation approach for 8% and 20% retained austenite volume fractions matched well with earlier experimental results. © 2015, © IMechE 2015.