The effect of residual aluminium, with a content ranging from 0.001 to 0.011 wt.%, on the microstructure and the magnetic properties of commercial low carbon electrical steel sheets was investigated. The retardation of the grain growth of steels with a residual aluminium content less than 0.007 wt.% was caused by the compound inclusions. Aluminium nitride became important when the content of residual aluminium was greater than 0.007 wt.%. It decreased the recrystallization rate and inhibited grain growth. When the aluminium nitride dominated, the grain size decreased. It was found that both core loss and permeability at 15 kG and 50 Hz were strongly influenced by the grain size. The specimens of larger grain size demonstrate better magnetic properties.