The morphology and microstructural evaluation of Y phases in AISI 321 (a Ti-stabilized stainless steel) were characterized after hot deformation. The electronic structure and phase stability of titanium carbosulfide were further discussed by first-principle calculations. It was found that Y phases, like curved strips or bones in AISI 321 stainless steel, mostly show a clustered distribution and are approximately arranged in parallel. The width of the Y phase is much less than the length, and the composition of the Y phase is close to that of Ti2SC. Y phases have exceptional thermal stability. The morphology of Y phases changed considerably after forging. During the first calculations, the Ti2SC with hexagonal structure does not spontaneously change into TiS and TiC; however Ti4S2C2 (Z = 2) can spontaneously change into the two phases. The Ti–S bonds are compressed in Ti4S2C2 cells, which leads to poor structural stability for Ti4S2C2. There is a covalent interaction between C/S and Ti, as well as an exchange of electrons between Ti and S/C atoms. Evidently, the mechanical stability of Ti4S2C2 is weak; however, Ti2SC shows high stability. Ti2SC, as a hard brittle phase, does not easily undergo plastic deformation.