Bulk samples with a relative density of 98.6±0.1% were obtained by laser melting of a 316L stainless steel powder prepared by gas atomization. Austenite remained as the only crystalline phase after laser melting determined by XRD. Besides the commonly observed texturing, a fine columnar sub-grain microstructure, i.e. an array of elongated sub-grains of size 0.5 μm, was observed inside each individual large grain of single-crystal nature and with grain size in the range of 10–100 μm. It was found that at the sub-grain boundaries the minor alloy element molybdenum was enriched accompanied with high dislocation concentration. Such sub-grain structure appears to form most probably by the compositional fluctuation due to the slow kinetics of homogeneous alloying of large Mo atoms during rapid solidification. The local enrichment of misplaced Mo and formation of Cr-containing silicate nano-inclusions in the Austenite lattice induced a fine network of dislocation tangling, which would retard or even block the migration of newly formed dislocations under indentation force, turning otherwise a soft Austenite to hardened steel. In addition, it was found that the local oxidation of active elements chromium and silicon yielded the formation of spherical nano-inclusions of an amorphous chromium-containing silicate. This mechanism of forming oxide nano-inclusions paves a way for cleaning the oxygen contamination presented already inside the starting powders and/or take-up during the laser melting process. It may also open up new possibilities for in-situ formation of oxide dispersed steels.