The microstructure of Zr-2.5Nb nuclear reactor pressure tube material has been studied using electron microscopy. X-ray diffraction, and energy dispersive X-ray spectroscopy techniques. The materials studied contained a range of impurity contents with iron ranging from 300 to 1500 ppm in both the cold-worked and cold-worked + annealed (24 h/560°C) conditions. Cold-worked tubes consisted of deformed α-Zr grains with a network of β-Zr (∼20wt%Nb) surrounding the α-Zr grains. Annealing produced a decomposition of the β-Zr phase into α-Zr and β-Nb (∼83 wt% Nb). Cold-worked tubing with Fe contents ⩾500 ppm also contained a very small volume fraction of Zr2Fe precipitates having a tetragonal structure, β-quenching during fabrication of the tubing appeared to suppress the precipitation of Zi2Fe. On annealing, both Zr(FeCr)2 and Zr2Fe precipitates were formed. The Zr(FeCr)2 precipitates had either the C-15 cubic or C-14 hexagonal Laves phase structure. It is proposed that on annealing at 560°C the β-Zr phase (containing Fe and Cr in solution) transforms to α-Zr + β-Nb + Zr(FeCr)2 phases.