In this study, four kinds of heat treatments were performed to obtain a certain amount of retained austenite, which can result in good toughness and low brittleness accompanied with wear resistance of an in situ VC particle reinforced iron-based composite (VCFC). Microstructure, mechanical properties and wear resistance of the samples under heat treatment of QP, QPT, MQP and MQPT were compared. The experimental results indicated that there is a huge difference in microstructure between MQPT and the other heat treatments. High-proportion retained austenite and white net-like precipitates of M7C3 carbide existed in the MQPT-treated sample, but thick M7C3 carbide with brittleness was discovered in the other sample. Thereby, high-proportion retained austenite contributed to its low hardness of 634 HV and high tensile strength of 267 MPa, while a maximum hardness of 705.5 HV and a minimum tensile strength of 205 MPa were exhibited in the QPT-treated sample with a V-rich carbide of high hardness, a Cr-rich carbide of brittleness and a high-proportion martensite. Meanwhile, a phase transformation from retained austenite to martensite could increase the hardness and enhance wear resistance based on the transformation-induced plasticity (TRIP) effect; its wear rate was only 1.83 × 10−6 mm−3/(N·m). However, the wear rates of the samples under QP, QPT and MQP heat treatments increased by 16.4%, 44.3% and 41.0%, respectively. The wear mechanism was a synergistic effect of the adhesive wear mechanism and the abrasive wear mechanism. The adhesive wear mechanism was mainly considered in the MQPT-treated sample to reduce the wear rate attributed to high-proportion retained austenite and the existence of wear debris with a W element on the surface of the wear track. However, the abrasive wear mechanism could exist in the other samples because of a lot of thick, brittle M7C3, thereby resulting in a higher wear rate due to immediate contact between the designed material and the counterpart.