Yttrium was diffused into the surface layer of FeCr alloy using an electrodeposition–thermal method via yttrium nitrate solution and diffusion annealing at 1000 °C. Y-doped FeCr samples exhibited excellent high-temperature oxidation resistance. The mass gains and spallation of Y-doped FeCr samples were only 0.51–0.64 mg/cm2 and 0.19–0.25 mg/cm2, respectively, and much lower than the alloy without yttrium (20.7 mg/cm2 and 9.08 mg/cm2, respectively) when oxidized in air at 900 °C for 200 h. The presence of yttrium increased the number of oxide nucleation sites, led to the transformation of the oxide from the Cr2O3 phase to the spinel (FeCrY)3O4 phase and accelerated the rapid formation of a continuous oxide film in the initial oxidation stage. The yttrium content affected the formation and microstructure of oxide film due to the lattice distortion of the FeCr phase. Excess Y induced formation of Y2O3 at grain boundaries, which further increased the bonding force between the oxide film and the substrate. A first-principles calculation confirmed that the bond strength between Y and other atoms was improved significantly. The length of the CrY bond showed little change under an external stress, which increased the bonding strength of the FeCr/Cr2O3 interface.