Effect of rare earth elements (RE) on erosion resistance of nitrocarburized layer of 38CrMoAl steel was investigated. The results indicate that significant improvement occurs in erosion resistance of nitrocarburized 38CrMoAl steel by introducing RE during nitrocarburizing processing as compared with conventional nitrocarburizing processing. Results of mechanical testing show that both hardness and impact toughness of RE-nitrocarburizing layer of 38CrMoAl steel increase as compared with the conventional one. Optical microscopy reveals that there is improvement in the nitrocarburized layer attributed to the introduction of RE, which results in improvement in erosion resistance. Surface morphology observation of tested samples reveals that predominantly furrow2like peelings from plastic deformation are observed for RE nitrocarburizied 38CrMoAl steel, while the furrow-like peeling with initial cross crack and large grinding peelings were observed for conventionally nitrocarburized samples.