The usage of steel powders prealloyed with chromium in PM components for high performance applications is steadily increasing. Excellent mechanical properties are achieved with these powder grades, provided that the processing into components is accurately done. Photoacoustic spectroscopy (PAS) technique has been used here to study oxide reduction during sintering in 90N2/10H2 atmosphere of test specimens based on 3%Cr-0.5%Mo prealloyed powders with 0.5% C added. Results from performed reduction trials show that Fe oxides on the powder surfaces are removed by H2 reduction early in the heating stage of the process. Carbothermal reduction is the main mechanism for reduction of stable Cr-containing oxides from 900°C and above. Efficient Cr oxide reduction requires a sintering temperature of at least around 1200°C. Therefore, small oxide particles remain in the material after sintering at 1120°C for 30 minutes. However, such oxides have earlier been shown to have no significant influence on mechanical properties.