FeSiCr alloys are used as soft magnetic materials for power multilayer inductors. The alloys are typically annealed at intermediate temperatures in air during inductor fabrication to form an insulating chromium oxide layer around the alloy particles. The variation of the annealing temperature between 700 °C and 900 °C in air, and, for the first time, the variation of the oxygen partial pressure during annealing at 900 °C are studied, and their effects on the alloy’s oxidation behavior, phase formation, insulation resistance, and permeability are demonstrated. The chromium oxide content increases up to about 12 wt% with annealing temperature in air, whereas it decreases to 8.2 wt% after annealing at 900 °C and 0.001% O2. The observed mass changes during annealing confirm the various tendencies towards oxidation. This oxidation behavior is reflected in an increase in the insulation resistance with annealing temperature or in a resistance reduction with decreasing oxygen partial pressure. The permeability decreases from µ = 22 after annealing at 700 °C to µ = 18.5 at 900 °C in air. The reduction of pO2 during annealing at 900 °C leads to an increase in permeability up to µ = 22.5 at pO2 = 0.001% O2. The results can be used to design cofiring strategies using reduced oxygen partial pressure for new composite multilayer inductive components consisting of FeSiCr- and ferrite layers in combination with silver metallization.