The microstructure of plasma nitrided layer catalyzed by rare-earth elements has beenstudied with TEM. The results show that the grains of γ’-Fe4N phase are refinedby rare-earth elements and the plane defects in boundary are increased by rare-earthelements. The addition of rare-earth element increases the bombardment effect andthe number of crystal defects such as vacancies, dislocation loops, twins and stackingfaults in γ’-Fe4N phase and can produce the high-density dislocations in the ferrite ofdiffusion layer at a distance 0. 08mm from the surface. The production of a numberof crystal defects is one of important reasons why rare-earth element accelerates thediffusion of nitrogen atoms during plasma-nitridiug.