In laser metal deposition (LMD) process, meltpool oxidation is inevitable due to high working temperature, which results in finely dispersed non-metallic inclusions in the steel matrix. In this paper, characteristics of these inclusion, such as number density and mean radius, were controlled by means of changing process parameters, for instance, scan speed and laser power, using AISI 316L stainless steel powders. Subsequently, the yield stress of cast samples from each condition was measured in order to investigate the possibility of utilizing these inclusions in material strengthening. As oxygen contents varied from 306 ppm to 994 ppm, number densities of inclusion varied from 16,900/mm2 to 34,000/mm2. The yield stress of deposited material was proportional to inclusion number density ranging from 218 MPa to 269 MPa. Oxygen contents were governed by beam intensity and deoxidizer compositions in the powder, while faster scan speed gave smaller inclusion diameter due to shorter time for growth. The composition and viscosity of slag layer,which covered interface between superheated meltpool and atmosphere, brought in a large difference in oxidation kinetic. Compared with conventional casting process, a large number of inclusions were more finely distributed and possess smaller size, meaning that oxide metallurgy can be fully utilized in the LMD process.