Objective To investigate the effects of Y2O3 additive on the microstructure and mechanical property of granular bainite hardfacing alloy. Methods The microstructures of the hardfacing alloy with different Y2O3 additives were observed using optical microscopy (OM), scanning electron microscopy (SEM) and transmission electron microscopy (TEM). The phase structures of the hardfacing alloys were determined using X-ray diffraction. The hardness, tensile property and abrasive resistance of the hardfacing alloys with different Y2 O3 additions were determined. Results The results showed that the primary austenite in the hardfacing alloy could be refined by Y2 O3 additive. The grain size of primary austenite decreased from 51. 2 μm to 40. 1 μm with the increase of Y2 O3 addition. Meanwhile, the size of proeutectoid ferrite (PF) decreased significantly and the faction of the bainite increased, so the M / A island could be distributed uniformly. The XRD analysis showed that the fraction of martensite increased while that of retained austenite decreased with the increase of Y2 O3 addition. TEM results showed that large number of dislocation martensite was transformed in M / A. The Y2 O3 additive could improve the hardness, strength and plasticity of the hardfacing alloys. With the increase of Y2 O3 addition, the hardness increased from (272±13)HV to (312±8)HV, the tensile strength increased from (764±10) MPa to (885±12) MPa and the elongation increased by 4% . Conclusion The grain size of primary austenite decreased with the increase of Y2 O3 addition. Meanwhile, the PF was refined significantly and M / A islands distributed uniformly. The fraction of martensite increased and the RA decreased with the increase of Y2 O3 addition. The mechanical property of the hardfacing alloy with Y2 O3 additive was improved.