IS304 coating was been prepared by high energy ball milling and induction sintering. The microstructure of IS304 was fine and dense, the sizes of self lubricating particles were very small. Ag particles were about 5 μm, BaF2/CaF2 particles less than 2 μm, while some BaF2/CaF2 particles were located in Cr2O3 particles to form composite structure. Results show that the temperature and microstructure have great effect on the wear rates of the IS304. At 20 °C, the friction coefficient is great. The worn surface showes that the brittle fracture is the dominant wear mechanism. With the increase of temperature, IS304 exhibits an improved friction coefficient in the temperature range from 300 to 350 °C due to the formation of self-lubricating fluoride films. The existence of fluoride film on the worn surface of IS304 is attributed to the size refinement and the appropriate distribution of fluorides, resulting in a higher temperature rise at the instantaneous contacting surface in comparison to that of the PM304. The finite element models with different microstructures were built to simulate the flash temperature.