The electrodes for hardfacing medium carbon steel with six additions of rare earth oxide were developed in this work. By means of optical microscopy and scanning electron microscopy, the microstructure, inclusion and the fractograph of the hardfacing metal were observed. Then, the effects of rare earth oxide on microstructure and inclusions in hardfacing metal were analyzed. The effectiveness of rare earth oxide as heterogeneous nuclei of δ-Fe was calculated with the misfit theory. The results showed that, the microstructure of hardfacing metal was composed of ferrite and small amount of pearlite. The microstructure was refined at first and then coarsened with the increase of rare earth oxide addition. The fractograph was changed from brittle to equiaxed dimples, then became quasi-cleavage and cleavage gradually.The calculated results showed that, the ferrite grain size could be refined because that LaA1O3 as heterogeneous nuclei ofδ-Fe was moderately effective, and the ferrite grain size was coarsened because the misfits between Ce2O3 and δ-Fe, Ce2O2S and δ-Fe were increased with futher increase of rare earth oxide addition.