Although steel has been the workhorse of the automotive industry since the 1920s, the share by weight of steel and iron in an average light vehicle is now gradually decreasing, from 68.1 per cent in 1995 to 60.1 per cent in 2011 (refs 1, 2). This has been driven by the low strength-to-weight ratio (specific strength) of iron and steel, and the desire to improve such mechanical properties with other materials. Recently, high-aluminium low-density steels have been actively studied as a means of increasing the specific strength of an alloy by reducing its density3,4,5. But with increasing aluminium content a problem is encountered: brittle intermetallic compounds can form in the resulting alloys, leading to poor ductility. Here we show that an FeAl-type brittle but hard intermetallic compound (B2) can be effectively used as a strengthening second phase in high-aluminium low-density steel, while alleviating its harmful effect on ductility by controlling its morphology and dispersion. The specific tensile strength and ductility of the developed steel improve on those of the lightest and strongest metallic materials known, titanium alloys. We found that alloying of nickel catalyses the precipitation of nanometre-sized B2 particles in the face-centred cubic matrix of high-aluminium low-density steel during heat treatment of cold-rolled sheet steel. Our results demonstrate how intermetallic compounds can be harnessed in the alloy design of lightweight steels for structural applications and others.