A co-precipitation hardened medium-Mn steel with respective NiAl and Cu-rich particles in dual phases (austenite and ferrite) has been designed by using a quenching-partitioning-tempering (QPT) treatment. The influences of co-precipitates on the elasto-plastic transition and strain compatibility has been investigated based on the micro-mechanical behavior of constituent phases, the evolution of lattice strain and stress components. Compared to the Cu-Free steel, in which single NiAl precipitates form in ferrite, co-precipitation in the Cu-Added steel results in an improved strain compatibility between austenite (γ) and ferrite (α). The lattice strains of both γ and α phases show similar evolutions during the entire strain regime, and a homogeneous elasto-plastic deformation occurs together with a continuous yielding and weak transient of strain hardening rate. The improved strain compatibility leads to an alleviation of strain localization in the phase interfaces, so that the overall back stress increases slowly with the tensile strain increasing during the whole plastic deformation process, although the transformation-induced plasticity (TRIP) effect of the Cu-Added steel only occurs at low strains (<5%) due to the low mechanical stability of the retained austenite. In contrast, a non-continuous yielding of the constituent phases occurs in the Cu-Free steel leads to strong strain transfer across the α/γ interfaces due to a low deformation compatibility between austenite and ferrite. High internal stress in the phase interfaces results in easy damage-crack formation, but it can be accommodated by the TRIP effect which dominates in large strains, resulting in back stress decreasing and effective stress hardening during the subsequent deformation stage. However, the introduction of hydrogen can aggravate the dislocation accumulation and strain transfer between austenite and ferrite; thus, hydrogen-induced cracks (HICs) are prone to nucleate at the α/γ interfaces while the TRIP effect is not significant, leading to premature failure and significant elongation loss (85.4%) of the Cu-Free steel. Therefore, the improved strain compatibility of the Cu-Added steel contributes to a better resistance to hydrogen embrittlement, although both medium Mn steels possess similar tensile strength (1 GPa) and elongation (25%) values.