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Austenitic stainless steel is used as fuel cladding in advanced gas-cooled nuclear reactors (AGR). At elevated temperatures, when the steel is exposed to CO2 based environments filamentary carbon deposits form on the surface of the steel. This filamentary carbon deposition is known to be catalysed by metallic nickel-rich particles. Adding trace amount of carbonyl sulphide (COS) into the gas mixtures suppresses the carbon deposition. In this current work, it has been shown that at 600 °C, the formation of filamentary carbon was suppressed by the addition of 215 ppb COS to a depositing gas mixture (containing approximately 1000 vppm C2H4/1% CO/bal. CO2) which was known to provide the environment suitable for carbon deposition. Samples exposed to the gas mixtures with and without 215 ppb COS were characterised using electron microscopy techniques to understand the formation mechanism of the nickel-rich particles and the inhibition mechanism due to the addition of COS. Electron diffraction study shows that the nickel-rich particles in the oxide layers assume the same crystallography as that of the austenitic metal underneath, regardless of the COS addition. The current observations also show that the metal-oxide interfaces was nickel-rich and a simple model has been proposed to explain the formation of nickel-rich particles within the subsurface oxide. Furthermore, it was found that when COS was added the surface of the nickel-rich particles in the oxide layer was found to be sulphur-rich by energy dispersive spectroscopy (EDS) on a scanning transmission electron microscope (STEM). It is believed that the surface sulphur adsorption onto the nickel-rich particles, rather than bulk sulphide formation, resulted in the inhibition of carbon deformation on the steel.