Surface quality of workpiece could be significantly improved by ELID grinding. However, ELID grinding bearing outer ring raceway with small inner diameter has small space, which limits installation of electrode. In this work, ELID grinding bearing outer ring raceway acting as cathode is proposed. But electric spark discharge will occur in ELID grinding with workpiece-cathode, which affects grinding quality. The purpose of this work is to investigate formation mechanism of electric spark discharge and influence of oxide layer on grinding quality. A novel experimental method is proposed to study state of oxide layer (mainly thickness and compactness) in ELID grinding bearing outer ring raceway with workpiece-cathode. Experimental results show that electric spark discharge occurs with thick oxide layer (characterized by control current), resulting in corroded pits on surface of oxide layer and workpiece in ELID grinding with workpiece-cathode. With increased control current, surface of oxide layer becomes smooth. Moreover, grinding force increases with increased control current. When control current is 0.5 A, surface roughness of workpiece is the largest. And surface roughness of workpiece increases with increased control current, as control current is greater than or equal to 1 A. The results are helpful to apply ELID to grind bearing outer ring raceway and improve ELID grinding performance.