A new multiscale modeling approach is proposed to predict the contributions of dynamic strain aging (DSA) and the resulting negative strain rate sensitivity (NSRS) on the unusual strain-hardening response of Hadfield steel (HS). Mechanical response of HS was obtained from monotonic and strain rate jump experiments under uniaxial tensile loading within the 10−4 to 10−1 s−1 strain rate range. Specifically, a unique strain-hardening model was proposed that incorporates the atomic-level local instabilities imposed upon by the pinning of dislocations by diffusing carbon atoms to the classical Voce hardening. The novelty of the current approach is the computation of the shear stress contribution imposed on arrested dislocations leading to DSA at the atomic level, which is then implemented to the overall strain-hardening rule at the microscopic level. The new model not only successfully predicts the role of DSA and the resulting NSRS on the macroscopic deformation response of HS but also opens the venue for accurately predicting the deformation response of rate-sensitive metallic materials under any given loading condition.