The FeCrAlRE (where RE is reactive element) alloy Kanthal AF was exposed isothermally at 600 and 800°C for 72 h in dry O2 and in O2 with 10 vol % H2O. The mass gains were 3–5 times higher at the higher temperature. The presence of water vapor increased the oxidation rate at 800°C, while no significant effect was observed at 600°C. A thin two-layered oxide formed at 600°C: an outer (Fe,Cr)2O3 corundum-type oxide, containing some Al, and an inner, probably amorphous, Al-rich oxide. At 800°C a two-layered oxide formed in both environments. The inner layer consisted of inward grown a-Al2O3. In dry O2 the originally formed outward grown g-Al2O3 had transformed to a-Al2O3 after 72 h. Water vapor stabilized the outward grown g-Al2O3 and hence no transformation occurred after 72 h in humid environment. RE-rich oxide particles with varying composition (Y, Zr, and Ti) were distributed in the base oxide at both temperatures and in both environments. The RE-rich particles were separated from the alloy substrate by a layer of Al-rich oxide. At 800°C the Y-rich RE particles were surrounded by thick oxide patches in both dry and humid O2.