Oxide dispersion strengthened ferritic alloys have superior radiation tolerance and thus become appealing candidates as fuel cladding materials for next generation nuclear reactors. In this study we constructed a model system, Fe/Y2O3 nanolayers with individual layer thicknesses of 10 and 50 nm, in order to understand their radiation response and corresponding damage mitigation mechanisms. These nanolayers were subjected to in situ Kr ion irradiation at room temperature up to ∼8 displacements-per-atom. As-deposited Y2O3 layers had primarily amorphous structure. Radiation induced prominent nanocrystallization and grain growth in 50 nm thick Y2O3 layers. Conversely, little crystallization occurred in 10 nm thick Y2O3 layers implying size dependent enhancement of radiation tolerance. In situ video also captured grain growth in both Fe and Y2O3 and outstanding morphological stability of layer interfaces against Kr ion irradiation.