Fundamental aspects of the design of ferrous alloys are described. The illustrative example demonstrate how the new alloys or optimization of existing alloys can be developed from a rational approach based on the coherent relationship between structure and property. Utilization of phase transformation is of paramount importance in controlling microstructures in a desirable configuration. Martensite transformation in strengthening strong, tough structural steels, retained austenite to improve fracture toughness, ferrite/martensite composite as an ideal system to achieve both strength and formability in low carbon steels, and spinodal transformation in developing permanent magnets were taken as examples in relation to alloy design.