Influence of lead, sulfur and oxygen contents on various properties of steels for machine structural use has been studied. Lead and sulfur improve machinability but deteriorate rolling contact fatigue strength and cold workability. Sulfur is more harmful for cold workability than lead. Oxygen is harmful for machinability, fatigue strength, rolling contact fatigue strenth and cold-workability.Based on the fundamental studies, high quality leaded steel ULO-M has been developed. ULO-M contains ultra low oxygen and an optimum amount of lead to improve the machinability without lowering fatigue strenth and cold workability. ULO-M can be applied to high strenth parts of automobiles and other machines. The good chip breakability of ULO-M helps the operation of automated and unmanned machine shops.