This study tries to reveal the mechanism of forming fine and dense oxide particles in oxide dispersion strengthened (ODS) ferritic steel during heat treatment after mechanical alloying (MA). The MAed powders with and without titanium are set to the heat treatment from 873K to 1423K and analyzed by small angle X-ray scattering and X-ray diffraction using synchrotron radiation, transmission electron microscopy, and 3D atom probe. Yttrium and oxygen are segregated along the grain-boundaries induced by MA and form clusters after 873K annealing. Fine oxide particles are densely formed before primary-recrystallization of the nano-sized grains induced during MA, at 973 K. The formation of cubic-Y2O3 and Y2Ti2O7 are observed at 1273K and above, where the size reduction of the oxide particles by Ti-addition is clearly shown.