We investigate the oxidation behavior of Si1-xGex alloys (x=0.05, 0.15, and 0.25). The thickness of nanolayers and property of nanoparticles in oxide films after oxidation in O2 (dry) atmosphere at different temperature and for various lengths of time are measured with the high precision ellipsometer, the Rutherford backscattering spectrometry and high-resolution scanning transmission electron microscopy. It was found that rejection of Ge from oxide layer results in piling up Ge at the interface between the growing SiO2 and the remaining SiGe, which forms a nanometer Ge-rich layer. We find a nanometer cap layer over the oxide film after fast oxidation, in which there are many Ge nanoparticles. Some new peaks in PL spectra related to the nanolayer and various kinds of nanostructure are discovered. We provide a quantum confinement model to analyze the PL spectra and the mechanism of nanostructure of the oxide and Ge segregation.