A nanostructured surface layer was fabricated in a quenched and tempered 0.4C-1Cr low alloy steel by ultrasonic particulate peening technique. The microstructure of the nanocrystalline surface layer was characterized by means of TEM and Mossbauer spectroscopy. Experimental results reveal that both cementite and ferrite nanocrystals with an average size of 5 nm were formed in the surface layer of the steel, phase transformation of austenite and dissolution of cementite maybe occur in the process of ultrasonic particulate peening.