A precipitation behavior of nano-oxide particle in Fe-5Y2O3 alloy powders is studied. The mechanically alloyed Fe-5Y2O3 powders are pressed at 750oC for 1h, 850oC for 1h and 1150oC for 1h, respectively. The results of Xray diffraction pattern analysis indicate that the Y2O3 diffraction peak disappear after mechanically alloying process, but Y2O3 and YFe2O4 complex oxide precipitates peak are observed in the powders pressed at 1150oC. The differential scanning calorimetry study results reveal that the formation of precipitates occur at around 1054oC. Based on the transmission electron microscopy analysis result, the oxide particles with a composition of Y-Fe-O are found in the Fe-5Y2O3 alloy powders pressed at 1150oC. It is thus conclude that the mechanically alloyed Fe-5Y2O3 powders have no precipitates and the oxide particles in the powders are formed by a high temperature heat-treatment