Mechanical alloying (MA) is an established way to prepare nanocrystalline materials and metastable solutions of materials, which normally have no mutual solubility. This is also the case for oxide dispersion strengthened (ODS) steels with improved mechanical properties at elevated temperatures. It is known that a small addition of yttria (Y2O3) has a beneficial effect on high temperature strength and reduces the creep rate in mechanically alloyed ferritic steels by about six orders of magnitude. This work is divided in two parts. In the first part an experimental study is presented using atom probe tomography, X-ray photoelectron spectroscopy, and positron annihilation spectroscopy combined with first principles modeling focusing on the distribution and behavior of yttria in pure iron prepared by mechanical alloying. Atom probe tomography and X-ray photoelectron spectroscopy measurements as well as positron annihilation spectroscopy conducted on powder particles directly after milling have revealed that a predominantly fraction of the yttria powder dissolves in the iron matrix and Y atoms occupy convenient positions, such as vacancies or dislocations. This is supported by ab initio calculations demonstrating that the formation energy for Y substitutional defects in bcc-Fe is significantly lower in the close neighborhood of vacancies. In the second part of this work the process route of a high-alloyed steel and an ODS steel has been combined and analyzed by means of atom probe tomography. The ODS high-alloyed steel shows an increase of hardness for 22 HRC after threefold tempering at 700 °C for 2 h, respectively.