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Quenched and tempered E550 steel was joined using flux-cored arc welding. The effect of cooling rate on microstructure, inclusions and mechanical properties of the weld metal was investigated by optical microscope, scanning electron microscope, transmission electron microscope and mechanical testing. Results show that weld metal microstructures consist of proeutectoid ferrite, ferrite side plate and acicular ferrite. As the cooling rate increased, the volume fraction of proeutectoid ferrite and ferrite side plate decreased, acicular ferrite increased accompanied with refined grain. Furthermore, inclusions of Ti, Mn oxide with diameter below 2.0 μm were found in the weld metal and rapid cooling rate causes distinct Mn-depleted zone between inclusions and matrix. Excellent balance of high strength and toughness is obtained as more acicular ferrite in weld metal with rapid cooling rate. This can attribute to the increased of acicular ferrite with its refined grain and high density dislocation. These findings suggest that the rapid cooling rate can improve the impact toughness and tensile strength of weld metal in local dry underwater welding. Keywords: Water cooling, Acicular ferrite, Inclusions, Mechanical properties