In this study, the effects of compressive residual stress and work hardening introduced by multifunction cavitation (MFC) treatment on the ductile–brittle transition for carburized steel were investigated. Prior to Charpy impact tests, variations in surface properties with processing time were evaluated. Both surface hardness and compressive residual stress increased rapidly and reached saturation at approximately 10 min, which was determined as the optimal treatment condition. Depth profile analysis under this condition revealed that the hardness and compressive stress increased to a depth of approximately 75 µm from the surface. The Charpy impact test results showed that the absorbed energy and lateral expansion of the MFC-treated specimens were substantially higher than those of the untreated ones in the intermediate temperature range (473–573 K). A strong linear correlation (Δh = kE) was observed between the absorbed energy (E) and the lateral expansion (Δh), and the proportional coefficient k increased from 1.438 × 10−2 cm/J for untreated steel to 1.544 × 10−2 cm/J after the MFC treatment. These results indicate that the compressive residual stress induced by MFC treatment relaxes the stress concentration at crack tips and enhances plastic deformation. Consequently, MFC treatment was found to be an effective surface modification method for reducing the ductile–brittle transition temperature of carburized steel.