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High density of thermally stable Y-Si-O nanoparticles dispersed in the Fe matrix play a primary role in oxide dispersion strengthened (ODS) steel. In this study, the binding energies of solutes Y, O and Si with vacancies have been calculated in the framework of first-principles density functional theory. According to the calculations, any two solutes of Y, O and Si bound with each other strongly in the second nearest neighboring (NN) sites while not in 1NN. A vacancy (<i>v</i>) bounds strongly with Y and O in 1NN site. The binding sequence of solutes with <i>v</i> followed O-<i>v</i> → Y-<i>v</i> → Si-<i>v</i>, and the affinity of Y, Si and <i>v</i> with O followed O-Y → O-<i>v</i> → O-Si. The nucleation mechanism of Y-O-Si nanoclusters was determined, which gave the feasibility of adding Si to ODS steels. The core (consisting of Si and O)-shell (enriched Fe and Cr) structure of the microparticles was found in ODS steels containing Si, fabricated by mechanical alloying (MA) and vacuum sintering. Moreover the nanoparticles of monoclinic cubic Y₂O₃, Y₂SiO₅ and Y₂Si₂O₇ with sizes of 5~12 nm were observed in ODS steel. Si reduced the sintering temperature by maximizing densities and mechanical properties at a lower sintering temperature. The steel with 3 wt% Si was sintered at 1280 °C, exhibiting the best comprehensive mechanical properties. The tensile strength, hardness and relative density were 1025 MPa, 442.44 HV and 95.3%, respectively.