<p>The thermal cycles experienced during laser welding of advanced high strength steels (AHSSs) have a profound impact on the microstructure and mechanical properties of its heat-affected zone (HAZ), posing challenges for automotive lightweighting. This study employs physical simulations carried out by a Gleeble-3500 system to systematically explore the effects of peak temperature (<i>T</i>_p) and cooling time (<i>t</i>_8/5) on different HAZ sub-zones of 980 MPa grade complex phase (CP980) steel. Microstructure analysis indicates that the formation of martensite leads to a 33% increase in hardness in the coarse-grained HAZ (CGHAZ) and fine-grained HAZ (FGHAZ), reaching 427 HV_0.2. The hardness of the intercritical HAZ (ICHAZ) increased by 14% to 358 HV_0.2. On the contrary, the hardness of subcritical HAZ (SCHAZ) shows a decrease of 20% to 257 HV_0.2, which is mainly resulting from the tempering of martensite. Notably, the higher peak temperature (<i>T</i>_p = 1310 °C) brings about coarser martensite laths, whereas the lower peak temperature (<i>T</i>_p = 1000 °C) promotes the refinement of bainite. The FGHAZ achieves the highest tensile strength of 1490 MPa, exceeding that of the base metal by 45%. Compared t<Emphasis Type="Underline">o</Emphasis> other sub-regions, SCHAZ exhibits the best impact toughness due to the presence of fine grain and numerous high-angle grain boundaries, reachin<Emphasis Type="Underline">g</Emphasis> 10.6 J at −40 °C. These findings clarify the correlation between thermal parameters, phase transformations, and mechanical property degradation, advancing the understanding of microstructural evolution under thermal cycling and providing a framework for balancing properties in welded joints, which is crucial for automotive lightweight applications.</p>