Ab initio density functional theory calculations were performed to study the effect of phosphorus on the structural, electronic, and magnetic properties of bulk, surface, and interface of κ-carbide (Fe3AlC) and fcc Fe. The aim was to shed light on the role of phosphorus in austenitic steels with κ-carbide particles, where its presence promotes both intergranular and transgranular embrittlement. The embrittling potency energy calculated as a difference between phosphorus binding energies at the F33AlC or fcc Fe surfaces and at Fe3AlC/Fe interface, indicates that phosphorus promotes embrittling behavior. Phosphorus at the interface has negative segregation energy which strongly depends on the phosphorus location as well as its concentration. The calculated cleavage energy decreases sharply for κ-carbide with substituted phosphorus as well as for the interface with segregated phosphorus; both contribute to the embrittlement. These results elucidate the microscopic reasons why phosphorus favors crack nucleation in κ-carbide, and why a crack propagates along the boundary between κ-carbide and austenite.