Microstructures of BiFeO3 (BFO) thin films epitaxially grown on SrRuO3 (SRO) buffered SrTiO3 (STO) (001) substrates by laser molecular beam epitaxy were investigated by means of transmission electron microscopy (TEM). The results showed that the films grown under the oxygen pressures of 1Pa and 0.3Pa, respectively, contain parasitic phase embedded in the BFO phase. The parasitic phase was revealed to be poor in Bi and rich in Fe by high-angle annular dark-field (HAADF) imaging and energy dispersive X-ray spectroscopy (EDS) compositional analysis. In combination with selected area electron diffraction patterns, the parasitic phase was determined to be α-Fe2O3. By lowering oxygen pressure, the density and the size of α-Fe2O3 phase increases whereas the regularity decreases. High resolution TEM images showed that approximately periodic misfit dislocations exist at the interface between the α-Fe2O3 phase and the BFO matrix, indicating that the α-Fe2O3 particles are semi-coherently embedded in the BFO films. Less misfit dislocations were detected at the interfaces between the BFO films and the SRO/STO substrates, implying that the misfit strains in the films may be fully relaxed by the formation of α-Fe2O3 phase.