Diffusion iron aluminide coatings have shown excellent resistance to high temperature oxidation in air, corrosive atmospheres and steam. A study of the diffusion behaviour of slurry applied diffusion aluminide coatings deposited on ferritic steel have been carried out under a 100% flowing steam atmosphere for up to 50,000 h at 650 °C. The results have shown that initially, the coating forms by outward growth possibly including the dissolution of the steel in molten aluminium. At later stages, during exposure to steam at 650 °C, aluminium diffuses inward and moreover, Fe also diffuses outward resulting in the progressive development of Kirkendall porosity. Results have also indicated that in order to form a pure protective Al2O3 scale the Al wt.% has to be > 4. Below this content Al-Fe mixed oxides develop exhibiting a less protective behaviour.