In this paper, the effect of an annealing treatment on the microstructure, mechanical properties and electrical conductivity of a deformed Cu-12.8 wt%Fe composite prepared by the “casting/cold working” process is investigated. The Fe filaments exhibit the shape characteristic in the as-drawn composite as the annealing temperature is lower than 500 °C. When the annealing temperature is above 500 °C, the Fe filaments undergo the instability process in terms of boundary splitting, coarsening and breakup gradually. The tensile strength gradually decreases with increasing annealing temperature due to the coarsening of filament spacing. The work hardening for the composite annealed above 600 °C is slower than that annealed at a lower temperature. The electrical conductivity reaches a maximum of 60%IACS at a temperature of 450 °C for one hour of annealing, and it further increases with increasing annealing time at 450 °C to reach a plateau of 68% IACS. The curve between the tensile strength and electrical conductivity under different annealing processes indicates that the optimum annealing temperature for the Cu-Fe composite is 450 °C.