The continuous annealing process is widely used in the production of advanced high-strength steels. However, to tightly regulate the mechanical properties of the steel, precise control of processing parameters is needed. Although some techniques are available to monitor the mechanical properties of the steel on entry and exit to the furnace, monitoring the evolving microstructure of the steel through installation of sensors in the annealing line is extremely challenging due to the high temperature, high speed of the steel strip and limited space in the furnace. This study presents the development and validation of a multifrequency electromagnetic sensor system for real-time monitoring of microstructural transformations in steel during thermal cycling, intended for deployment in a continuous annealing line. Experiments were conducted on austenitic stainless steel to study the signal response to an increase in resistivity without a change in magnetic permeability. Pure nickel was tested to investigate the response to a change in magnetic permeability and the ferromagnetic-to-paramagnetic transition at its Curie temperature. A ferritic stainless steel was also tested to assess the performance of the system for high-temperature ferromagnetic materials and a higher-temperature ferromagnetic-to-paramagnetic transition. The tests indicate a strong response to material resistivity and permeability changes, with complementary information from different frequencies. Test results are supplemented by a finite element modelling study into the effect of a change in frequency and permeability on sensor response, with a discussion on the implications of experimental and modelling results for future applications. The results show that the developed system has the potential to characterise thermally induced changes in steels, establishing proof of concept for non-destructive, high-temperature electromagnetic sensing in steel processing and setting the foundation for further industrial deployment in phase and recrystallisation monitoring.