A new improved oxide dispersion strengthened (ODS) Eurofer steel was produced by a novel two step mechanical alloying route. Starting from atomized Eurofer powder, two batches of fine and coarse particles with average sizes of ~60 μm and ~120 μm were milled separately after the addition of Ti and nanosized Y2O3. The final blend of the two powder batches was synthetized by hot isostatic pressing (HIP) to obtain a fully dense material with a microstructure characterized by two distinct zones: zones with high density particles (HDPZ) and zones with low density particles (LDPZ). The mechanical properties of the processed material in the as−HIP state and after tempering have been improved significantly compared to various ODS Eurofer and ODS Fe–Cr steels treated by different thermomechanical processing routes (TMP). The stress−strain curve at 600 °C manifested softening while a steady state constant stress was observed at higher temperatures. The stress exponent was two times lower compared to the base Eurofer material; i.e. ~12 vs ~24. Dynamic grain refinement was observed together with ferrite to martensite transformation resulting in an increase in ferrite−martensite interfaces and formation of low angle grain boundaries (LAGBs). Electron back scatter diffraction (EBSD) technique was used to characterize the microstructure and analyze the deformation mechanism.