The intragranular ferrite, which renders fabrication of fine-microstructure and improves toughness of welds in ultra-fine grain steels, is often observed to nucleation on non-metallic inclusion. The mechanism of this nucleation is related to the interfacial energy between austenite, ferrite with inclusions, the solute depletion zone around the inclusions and the strain energy due to different thermal coefficients between matrix and inclusions, et al. The interfacial energy of iron with nitrides and carbides is crucial to promote the ferrite nucleation on such as VN. On the other hand, the composition change in local austenite is probably the control reason for ferrite on MnS and Ti2O3. The thermal strain energy is calculated to be far less than the driving force for phase transformation and not effective to promote ferrite nucleation unless at very small undercoolings.