The annealing behaviour of ultrafine grained steels containing nano-scale dispersed oxides was studied in a temperature range of 600—900°C by means of microstructural observations and hardness measurement. The starting materials with submicrocrystalline structures were developed by mechanical milling of Fe-Fe₃O₄ powders followed by consolidating bar rolling at 700°C. Depending on the initial oxygen content and the mechanical milling time, the fraction of dispersed oxides varied from 0.3 to 3.0 vol%. During the heating up to 800°C (i.e. within the ferrite region), the initial ultrafine grained microstructures were essentially stable against any discontinuous grain growth. The grain coarsening and the softening can be roughly expressed by power-law functions of annealing time. The main mechanism of microstructure evolution that operated during annealing is considered as a normal grain growth accompanied by recovery. The grain coarsening is characterized by a rather high value of the grain-growth exponent of about 20. The grain growth kinetics correlates with the oxide coarsening. The effect of dispersed oxides on the annealing behaviour of submicrocrystalline oxide bearing steels is discussed in some detail.