Quenching and partitioning (Q&P) treatments were applied to 0.25C steel to produce the microstructures that exhibit an improved balance of mechanical properties. The simultaneous bainitic transformation and carbon enrichment of retained austenite (RA) during the partitioning stage at 350 °C result in the coexistence of RA islands with irregular shapes embedded in bainitic ferrite and film-like RA in the martensitic matrix. The decomposition of coarse RA islands and the tempering of primary martensite during partitioning is accompanied by a decrease in the dislocation density and the precipitation/growth of η-carbide in the lath interiors of primary martensite. The best combinations of a yield strength above 1200 MPa and an impact toughness of about 100 J were obtained in the steel samples quenched to 210–230 °C and subjected to partitioning at 350 °C for 100–600 s. A detailed analysis of the microstructures and the mechanical properties of the steel subjected to Q&P, water quenching, and isothermal treatment revealed that the ideal strength–toughness combinations could be attributed to the mixture of the tempered lath martensite with finely dispersed and stabilized RA and the particles of η-carbide located in the lath interiors.