The white-etching structural alteration occurring around nonmetallic inclusions in cyclically stressed bearing steels has been studied by transmission-electron microscopy. In order to use this method, thin foils have been prepared with an edge running through the alteration. It has been found that the alteration is due to the formation of 0.05 to 0.1-micron cells in ferrite. The cell formation is similar to that seen in fatigued iron except for the small cell size of the deformed steel. Evidence is also given that deformation causes breakup of the carbides produced on the tempering of steel prior to deformation.