The extent to which powder recycling can be permitted before risking a loss in performance of critical components is a major aspect for the viability of electron beam melting (EBM). In this study, the influence of powder oxidation during multi-cycle EBM processing on the formation of oxide-related defects in Alloy 718 is investigated. The amount of defects and their distribution in samples produced from virgin and re-used powder is studied by means of image analysis and oxygen measurements. Morphological analysis using scanning electron microscopy is performed to understand their origin and formation mechanism. The results indicate a clear correlation between the powder oxygen content and the amount of oxide inclusions present in the investigated samples. The inclusions consist of both molten and unmolten Al-rich oxide which originates from the surface of the recycled powder. Upon interaction with the electron beam, the oxide tends to cluster in the liquid metal and form critical sized defects. Hot isostatic pressing can be successfully used to densify samples produced from virgin powder. However, in the material fabricated from recycled powder, a considerable amount of damage relevant oxide inclusion defects remain after HIP treatment, especially in the contour region. It is suggested that the quality of EBM-processed Alloy 718 is at present dependent on the oxygen level in the powder in general, and on the surface chemistry of the power in particular, which needs to be controlled to maintain a low amount of inclusions.