Study of high temperature steam oxidation kinetics and microstructural evolution during the oxidation was carried out on the coupons of Zr–2.5%Nb pressure tube material of Indian Pressurized Heavy Water Reactors (PHWRs) in the temperature range 500–1050 °C. The oxidation kinetics derived from the weight gain measurements showed a parabolic rate law with the parabolic rate constant K_P expressed as an Arrhenius equation K_P = 10.12 X 10⁸ X exp(18664/T). Hydrogen pick up was less than 55 ppm in the samples oxidized at temperatures up to 850 °C but high (250–400 ppm) in the samples oxidized in the b phase region (900 °C and above). The microstructure of the samples oxidized above the α-Zr/β-Zr transition temperature showed from the surface inwards sequentially the presence of an oxide layer, an underlying oxygen stabilized α-Zr layer and a prior β-Zr phase containing hydride precipitates. An increase in the hardness was observed near the oxide-metal interface in the coupons oxidized above 900 °C, due to formation of oxygen stabilized α-Zr layer. Higher hardness was also observed in the base metal in the samples oxidized at 1000 °C and 1050 °C.