<p>Martensite-matrix dual-phase (DP) steel is increasingly used for high-strength automobile parts owing to its excellent compatibility, ductility, and tensile strength. However, its higher fracture strain, reflected by the hole expansion ratio, hinders further adoption of this material. Therefore, in this study, we conducted a microscale investigation of the ductile fracture behavior of 1180-MPa class martensite-matrix DP steel to obtain a guideline for microstructural design and improve fracture strain. In situ tensile test was conducted simultaneously with scanning electron microscopy (SEM) and crystal plasticity finite element analysis (CP-FEA). The in situ tensile test results indicated that microcracks initiated at certain martensite packets, not propagating into other packets. The CP-FEA results revealed that the martensite crystal orientation caused this behavior to induce remarkable stress and strain localization at interfaces within the vicinity of ferrite islands, relaxing the stress and strain localization at distant martensite packets. Although the cracks observed around the ferrite–martensite interfaces were similar to those observed in conventional ferrite-matrix DP steels, such matrix-phase cracks have rarely been reported, except for those immediately before final fracture. Thus, the optimization of the ferrite island distribution to suppress the formation of stress and strain localization sites was identified as the key aspect of martensite-matrix DP steel microstructural design. This design can be achieved using a combination of data science and CP-FEA.</p>