A method of manufacturing an oxide dispersion strengthened ferritic steel excellent in high-temperature creep strength having a coarse grain structure. The method comprises mixing alloy powders and an Y.sub.2O.sub.3 powder, subjecting the mixed powder to mechanical alloying treatment, solidifying the alloyed powder by hot extrusion, and subjecting the extruded solidified material to final heat treatment involving heating to and holding at a temperature of not less than the Ac.sub.3 transformation point and slow cooling at a rate of not more than a ferrite-forming critical rate which comprises, 0.05-0.25% C, 8.0-12.0% Cr, 0.1-4.0% W, 0.1-1.0% Ti, 0.1-0.5% Y.sub.2O.sub.3 by weight, with the balance being Fe. In this method, by using a TiO.sub.2 powder as a Ti component to be mixed at the mechanical alloying treatment or by adding a Fe.sub.2O.sub.3 powder, the bonding of Ti with C is suppressed, and the C concentration in the matrix does not decrease.