The characterization of the microstructure and phase transformation in adiabatic shear bands (ASB(s)) within the serrated chips generated during high-speed machining of hardened 30CrNi(3)MoV steel has been performed. The observations showed that the microstructure gradually changes from the center of the ASB to the matrix of the chip, the fine equiaxed grains appear with size of about 0.4-0.6 mu m in the center of the ASB(s), the transitional region adjacent to the ASB is characterized by the broken and elongated martensite laths in shear direction. The analysis indicated that the serrated chip formation was likely due to adiabatic shear instability that occurred in the primary shear zones and the transformation to martensite within the ASB. Dynamic recovery and recrystallization are the dominant metallurgical processes during microstructural evolution of ASB.