The internal oxidation zone (IOZ) of a Sm(Co bal Fe 0.22 Cu 0.08 Zr 0.02 ) 7.5 alloy formed in air at 700°C was characterized using transmission electron microscopy (TEM). It shows that the internal oxides are varied in composition and size with depth, from mainly fine FeSmO 3 in shallow area to larger Sm 2 O 3 in deeper area. The internal oxidation also causes the formation of a thin phase transformation zone between the IOZ and the alloy. The internal oxidation mechanism, together with the oxidation-induced phase transformation of the magnetic matrix phases of the alloy, is fully disclosed.