Abstract: To elucidate the mechanism by which low-degree carbonation influences the macroscopic strength of stainless-steel slag, carbonated slag samples with carbonation efficiency ranging from 1.21% to 11.68% were prepared by varying the carbonation duration in a closed reactor at 210 °C with a liquid-to-solid ratio of 20% and a CO₂ partial pressure of 0.2 MPa. Mortar specimens were fabricated by blending the carbonated slag with P.I 42.5 reference cement at a 30% mass replacement ratio and curing under standard conditions for up to 28 days. The phase composition was characterized by thermogravimetric analysis coupled with derivative thermogravimetry and X-ray diffraction, the pore structure of hardened mortars was examined by mercury intrusion porosimetry, and the interfacial transition zone between the slag particles and the cement paste matrix was analyzed by scanning electron microscopy with backscattered electron imaging and energy-dispersive spectroscopy. The width of the interfacial transition zone was quantified using gray-value profiles extracted perpendicular to the particle boundaries, and its internal porosity and compositional homogeneity were assessed via threshold segmentation and standard deviation analysis. The results revealed a distinct U-shaped evolution of the 28-day compressive strength with increasing carbonation efficiency, featuring a strength minimum at 3.33% and a performance compensation point at 3.95%. The underlying mechanism governing this nonmonotonic behavior is based on the morphological evolution and spatial redistribution of the CaCO₃ carbonation product. At carbonation efficiencies below 3.33%, the reaction is largely confined to the particle surfaces where the preferential consumption of free lime and its hydration product Ca(OH)₂ generates CaCO₃ in the form of isolated encapsulation layers. These discontinuous layers act as physical barriers that impede the hydration of the internal dicalcium silicate while simultaneously introducing harmful micron-scale pores into the matrix, thereby accounting for the initial strength decline observed at this stage. Once the carbonation efficiency surpasses 3.33%, the reaction front advances into the dicalcium silicate phase and the newly formed CaCO₃ undergoes a critical morphological transition from isolated clusters to a continuous grid-like network. This structural transformation fundamentally alters the role of CaCO₃ from a hydration inhibitor to a synergistic reinforcer: the interconnected carbonate framework fills and progressively refines the capillary pore system while its extensive surface area provides abundant heterogeneous nucleation sites that promote the dense precipitation and intimate intergrowth of the calcium-silicate-hydrate gel throughout the matrix. At a carbonation efficiency of 3.95%, these positive contributions fully offset the initial adverse encapsulation effects, restoring the compressive strength to a level comparable to that of the untreated slag. Further carbonation to 11.68% elevates the 28-day compressive strength to 42.2 MPa, corresponding to an enhancement of 24.5% relative to the untreated reference material. In parallel with these bulk matrix modifications, deep carbonation substantially changes the interfacial transition zone. The average width of this zone decreases from over 20 μm to below 6 μm, and its internal structure changes from a porous and compositionally heterogeneous layer into a densified, homogeneous composite region in which calcium carbonate and calcium-silicate-hydrate gel are intimately interwoven, thereby strengthening the particle-matrix bond. This study demonstrates that precise regulation of carbonation efficiency dictates the morphological fate of carbonation products which in turn governs the pore structure refinement and interfacial densification that collectively underlie the U-shaped strength response. These findings provide a mechanistic basis for carbonation-based resource utilization of stainless steel slag, where steering the process beyond the compensation threshold enables carbonation products to act as synergistic reinforcements rather than physical barriers.