PM 1000 is a powder-metallurgy (P/M) nickel-based superalloy containing about 1% (volume) of fine and uniformly dispersed incoherent particles in an austenitic matrix. In the present paper, we have investigated the annealing behavior of rods deformed by cold swaging to reductions of 24 and 44% followed by annealing in temperatures varying from 800 to 1350 °C. The microstructural changes were followed by channeling contrast in the scanning electron microscopy (SEM), electron backscattering diffraction (EBSD), and transmission electron microscopy (TEM). Results show that discontinuous recrystallization and extended recovery are responsible for the softening of this alloy. A few grains found preferentially at grain boundary regions and within deformation heterogeneities like shear bands are able to grow corresponding to a recrystallized volume fraction lower than 10%. These new grains are arranged in colonies having a significant amount of annealing twins with Σ3-symmetry boundaries. The pinning effect on boundaries exerted by hard non-deformable particles (Zener drag) tends to suppress growth of most recrystallized grains. In the less deformed regions of the microstructure, a particle-stabilized subgrain structure is present and further softening is not significant even when longer annealing is performed.