Y2O3 inclusions with typical sizes between 100 and 300 nm3, densely distributed (1016 cm-3) in sputtered YBa2Cu3O7 (YBCO) films on SrTiO 3 substrates, have been identified by high-resolution electron microscopy. The precipitates exhibit either cuboid or needlelike shapes and grow epitaxially within and on top of YBCO. The dominant orientation relationship corresponds to a situation where the two-dimensional lattices are nearly coincident in the interfacial (001) plane. These precipitates may contribute to the generation of screw and edge dislocations. In addition, they provide a large number of potential pinning sites for magnetic flux lines, which may contribute to the observed high critical current densities.