The evolution of the phase distribution, the composition and the growth kinetics of the compound layer is described for nitrocarburising experiments at well defined combinations of nitriding and carburising potentials in the gaseous environment. Initially, the compound layer development is associated with a strong absorption of carbon from the nitrocarburising gas: the nitrogen contnt in the layer increases gradually, while the carbon content decreases accordingly. Layer growth kinetics depends strongly on the distribution of phases in the compound layer. Fastest growth was observed for compound layers where epsilon carbonitride phase is the dominant phase and extends from the surface to the interface with the substrate. Both cementite and gamma' phase, with narrow composition ranges, reduce the growth rate. Modelling of the microstructure evolution during nitrocarburising is hindered by the lack of accurate thermodynamic and kinetic data, the latter including both solid state diffusion of N and C and the surface reactions by which N and C are transferred to the sample.