We report the results of studies on AlN which precipitates during the &ggr;‐&agr; phase transformation in high permeability grain‐oriented silicon steel (HI‐B). We examined the behavior of AlN in each stage of the process by means of chemical analysis, electron microscope observation and hydrogen hot extraction technique. The AlN observed by the electron microscope in each stage of the HI‐B production process can be classified into three types: A type: fine needle‐like precipitate; B type: fine plate‐like precipitate of irregular shape; C type: larger agglomerate plate‐like precipitate. The B type AlN, the most important nitride, precipitates during the &ggr;‐&agr; phase transformation which occurs continuously on cooling after hot band annealing. This irregularly‐distributed fine AlN is believed to play an important inhibiting role in the secondary recrystallization process.