Effect of retained austenite on rolling contact fatigue of nitrocarburized high-carbon chromium bearing steel has been investigated to develop surface-hardened bearing steel with imprved resistance to rolling contact fatigue. Fatigue tests were conducted in elesto-hydrodynamic lubricating conditions at a shaft speed of 5,000rpm, under max, hertzian stress of $492kg/mm^2$. Volume fraction of retained austenite in austenitic nitrocarburized STB2 steel was controlled by tempering at various temperature, $200{sim}250^{circ}C$. It was observed using TEM that decomposition of retained austenite during tempering at $250^{circ}C$ was the highest in quantity, resulted in formation of lower bainite. Rolling contact fatigue life of the specimens with lower bainite, formed by decomposition of retained austenite, was improved in comparison with there of specimens with more amount of retained austenite.