The microstructure and texture transformation of unidirectional rolled 3% Y2O3p/ZGK200 composites were investigated after annealing at 300 °C for 5–60 min. The results showed that the deformed grains transformed into fine recrystallized grains which continuously grew up during annealing. Correspondingly, the elliptical annular texture changed into a non-basal texture tilted along the transverse direction (TD) with the reduced texture intensity, the widened distribution and the increased tilting angle of TD-split texture. The recrystallized texture was influenced by preferential grain nucleation and preferential grain growth of recrystallized grains with c-axis tilted 45–70° and 70–90° from normal direction (ND) during annealing. The Y2O3 particles could promote a higher tilting angle while the w-phases could also promote recrystallized grains. In addition, co-segregation of Zn/Gd resulted in TD-split texture after annealing. Meanwhile, the recrystallized grains with c-axis tilted 45–70° from ND showed preferential growth, which was attributed to the reduced store energy and increased low energy grain boundary such as 73° [10−10].