A soft magnetic steel has, on the mass basis, a carbon content of 0.0015% to 0.02%, a manganese content of 0.15% to 0.5%, and a sulfur content of 0.015% to 0.1%, has a ratio Mn/S of 5.7 or more, and contains a single-phase ferrite microstructure as its metallographic structure, in which the density of precipitated FeS grains having a major axis of 0.1 .mu.m or more is 5000 grains/mm.sup.2 or less. This steel ensures excellent magnetic properties with less variation after magnetic annealing, exhibits excellent machinability and cold forgeability during production processes, and can thereby yield a steel part even having a complicated shape and a large size in a high yield.