The feasibility of strengthening the Zr1%Nb alloy by achieving a non-uniform solid solution oxygen distribution in the α grains is considered. Technology employing Nb2O5 as an oxygen source has been developed, which permits introduction into the alloy additional oxygen up to 0.06–0.09 wt. %. Using the method of electron microscopy, the oxygen distribution of the as-produced alloy was examined. The material was found to contain Zr and Nb oxides of non-stoichiometric compositions. The regular features of plastic deformation localization were investigated. These features as revealed by the deforming material may be regarded as forerunners of necking in the course of Zr alloy tube manufacture and are indicative of probable material fracture.