Nanostructural Y-Zr-O complex oxide dispersion-strengthened (ODS) Mo alloys are designed for accident-tolerant fuel cladding. The phase and morphology evolution of ODS Mo powders during mechanical alloying (MA) and annealing were studied. The dissolution and reprecipitation mechanisms were revealed by quantitative calculation of dissolved Y and Zr amounts, thermodynamics and dynamics analysis, and phase analysis. The results reveal MA induces Mo grain refinement and a high density of dislocations in powders, facilitating the dissolution of Y2O3 and Mo2Zr and the formation of Mo supersaturated solid solution, rather than the negative mixing heat. By subtracting vacancies and oxygen effects, the dissolved amount is estimated as 2.2 at.% Y and 1.8 at.% Zr after 96 h-milling. During annealing, the Y-Zr-O complex oxide is precipitated in Mo-10 wt%Y2O3 powders above 900 °C since the introduced ZrO2 contamination during MA, and then cubic-Y2O3 beyond 1100 °C. The findings provide a scientific basis for controlling Y-Zr-O complex oxide nanoprecipitates and optimizing the service performance of Mo alloys.