1. Dispersion hardening of steel 1Kh20N14S2 at 650°C occurs in two stages. The first stage lasting up to 500 hrs is characterized by the precipitation of secondary carbides Me23C6 and their coalescence, principally along austenite grains. The second stage is connected withσ-phase formation. 2. Upon holding in excess of 500 hrs, the coalesence of carbide Me23C6 prompts a formation ofα-phase (alloyed ferrite depleted in chrome) adjacent to the carbide particles. 3. The diffusional mobility of the atoms in the components of metastable ferrite secures a growth ofσ-phase nuclei. Particles of sigma grow also on account of dissolution of carbides. 4. In areas with a distorted crystal lattice,σ forms also along slip lines and twin boundaries. Precipitates ofσ-phase have an acicular form; ordinarily, they are globular.