To provide resistance to aggressive environments at elevated temperatures, especially in excess of ∼1000°C, alloys or coatings which develop scales are the best choice. It has been pointed out that the presence of highly stable rare earth oxide dispersoids in high temperature alloys leads to improvements in the corrosion‐resistant properties of scales formed on such alloys. The present study is directed toward developing an understanding of how the properties of scales formed on Fe‐based alloys are influenced by yttrium oxide dispersoids in the alloy. The Fe‐based alloy system selected for the current study consists of ∼20% Cr, ∼4.5% Al, ∼0.5% Ti, and ∼0.5% . The oxidation kinetics of the alloy have been established at various oxygen partial pressures in the temperature range 1000°–1200°C. The scales which result upon oxidation are observed to be columnar, ultrafine grained, and extremely adherent when thermally stressed. Platinum markers initially placed on the alloy surface are found at the oxide/gas interface at the completion of oxidation, suggesting that scale growth occurs by exclusive inward oxygen migration. The ultrafine grain size (0.5–1 μm) suggests that grain boundaries in the oxide scale are the preferred path for oxygen migration. The fine dispersoid particles in the alloy (200–500Å) transform to coarse (∼0.5 μm) yttrium aluminum garnet upon incorporation into the scale, leading to a garnet‐saturated scale. It is suggested that the remarkable adherence of the scales is a consequence of a combination of factors. First, yttrium doping promotes the development of a fine‐grained scale which can effectively relieve oxide growth stresses by diffusional plastic flow. Second, because the alumina scale grows by exclusive inward oxygen transport, growth stresses arising from nucleation within an existing scale are avoided.