Oxide layers of similar starting thicknesses were grown on Zr-2.5Nb pressure tube material in air at 400 °C and in steam at 400 °C and 10 MPa. Both types of oxides were subjected to (a) further long term exposure up to 85 days in steam at 400 °C and 10 MPa and (b) nodular corrosion in a gas mixture of CO₂ and O₂ in presence of a contaminant, HCl at 350 °C. The air oxidized material gave an advantage of no hydrogen pick-up to start with as against steam oxidized material. Both types of oxides exhibited similar uniform oxidation and hydrogen pick up behaviour during long term exposure in steam at 400 °C and 10 MPa. On the other hand, the air-formed oxide was found to be more resistant to nodular corrosion in a gas mixture of CO₂ and O₂ at high temperature in presence of hydrochloric acid. The superior nodular corrosion resistance was attributed to a thicker impervious layer in the oxide rendering better protection from local oxide damage. This has been explained through the global mechanism for nodular corrosion in gas phase. The usefulness of air oxidation in the final steps of pressure tube fabrication has been discussed as well.