In situ observations of the austenite grain growth and martensite transformations in developed NM500 wear-resistant steel were conducted via confocal laser scanning high-temperature microscopy. The results indicated that the size of the austenite grains increased with the quenching temperature (37.41 μm at 860 °C → 119.46 μm at 1160 °C) and austenite grains coarsened at ~3 min at a higher quenching temperature of 1160 °C. Furthermore, a large amount of finely dispersed (Fe, Cr, Mn)3C particles redissolved and broke apart at 1160 °C, resulting in many large and visible carbonitrides. The transformation kinetics of martensite were accelerated at a higher quenching temperature (13 s at 860 °C → 2.25 s at 1160 °C). In addition, selective prenucleation dominated, which divided untransformed austenite into several regions and resulted in larger-sized fresh martensite. Martensite can not only nucleate at the parent austenite grain boundaries, but also nucleate in the preformed lath martensite and twins. Moreover, the martensitic laths presented as parallel laths (0~2°) based on the preformed laths or were distributed in triangles, parallelograms, or hexagons with angles of 60° or 120°.