The effect of processing parameters on the grain refinement of vanadium nitrogen microalloyed steel was investigated by performing hot deformation tests. The interaction between static recrystallization and precipitation was analyzed and the effect of final temperature, cooling rate and holding time on the microstructure of the tested steel is discussed. The results showed that smaller ferrite grains could be obtained with lower temperature or higher cooling rate. It was found that carbonitrides could precipitate at temperatures around 850 °C, which could retard recrystallization. The precipitated particles could inhibit grain growth and promote ferrite nucleation, which leads to ferrite grain refinement. Therefore, fine ferrite grains could be obtained by performing multi-pass compression testing at this specific finishing temperature followed by appropriate holding.