The precipitation of gamma'-Fe4N phase from the epsilon-matrix in a quenched and aged compound layer of 0.2%C steel formed by austenitic nitrocarburizing treatment has been investigated through transmission electron microscopy. The orientation relationship between the gamma' phase and the epsilon matrix is determined to be {0001}(epsilon) // {111}(gamma'), and [1 (2) over bar 10](epsilon) // [011](gamma'). The gamma' precipitates appearing in thin plates in the {0001} planes of epsilon matrix are sometimes observed to be 180 degrees related to each other. The mechanism of age-hardening in the compound layer is also discussed.