Induction hardening is often used in the automotive sector to give steel superior mechanical properties. Compared to steel, induction-hardened AISI 1040 steel has higher hardness and better toughness. In the hardening process, various operating variables (e.g., power supply, scan rate, distance between work-piece and coil) are considered and optimized using the Taguchi approach. An L27 orthogonal array is chosen for the experimental design based on the operating variables and their levels. These optimized operating variables improved surface hardness and core toughness under industrial conditions. The formation of martensite is expected for suitable operating parameters. Due to the transformed/developed structure of the AISI 1040 steel, the response variables (i.e., surface hardness, case depth) are measured following the induction hardening process. Signal-to-noise (S/N) ratios and analysis of variance (ANOVA) were-employed to determine the optimal process conditions and significant operating variables, respectively. As a result of the analyses, the optimization of the operating variables for induction-hardened AISI 1040 steel is investigated. The results from using the optimal operating variables changed from 55 HRc to 18 HRc on the surface of the steel compared to the core. As a consequence of the optimization, light and scanning electron microscopy are performed to determine the effects of the hardness from the outer surface to the center. Transformations associated with structural changes are investigated, and the results are discussed.