The initial stage of oxidation of Ti45Al7Nb0.4Y alloy (at.%) oxidized at 900 °C in air was investigated by using x-ray photoelectron spectroscopy and Auger electron spectroscopy. Experimental results revealed that YAl2 segregated along the grain boundaries preferentially oxidized to Y2O3 and Al2O3 due to strong affinity of Y to oxygen. Oxides grew faster at the grain boundaries than in lamellar colonies. As a result, Y and Al oxides pegs protruded into the substrate, which can increase the contact areas of oxide scale and substrate. Moreover, inward diffusion of oxygen more easily occurred along the grain boundaries. As a result, it promoted the external oxidation of Al within the grains due to lower inward diffusion flux of oxygen. And coarse-grained Y2O3 blocked the cationic intergranular diffusion. Therefore, Y addition can effectively enhance the Al2O3 layer and suppress the TiO2 outermost layer.