Temperature dependence of oxide layer formation on hydrogen isotope retention in stainless steel type 316 was studied by TDS and XPS. The shape of TDS spectrum was clearly changed by the oxide formation temperature. The chemical states of iron, chromium and oxygen were also evaluated by XPS. The surface oxide layer was composed of iron and oxygen and the contribution of chromium was quite low. The ratio of oxide layer on stainless steel increased as increasing the annealing temperature. The deuterium retention trapped by the oxide layer, which corresponded to the desorption temperature of 600-800 K, was governed by the ratio of oxide layer, especially iron hydroxide. All of the iron was not oxidized and the saturation ratio of iron oxide to pure iron existed in the stainless steel. It was concluded that the saturation of deuterium retention trapped by the oxide layer was controlled by the amount of iron oxide in the oxide layer.