"Lath Graphite" is one of the major defects that are often formed on the surface of cold-rolled steel coils annealed by the batch annealing (BA) process. In this article, the origin of this defect was studied by analyses of the surfaces of the steel samples before and after annealing. The formation of this defect was also simulated in the laboratory by the controlled annealing conditions. With the help of both analyses and simulations, the key processing parameters that contribute to Formation of this defect were identified. It was found that the "roll-in scale", due to insufficient de-scaling operation in the hot rolling process, is the origin of this surface defect. Increase of the de-scaling ability in the hot strip mill and use of 100% H_2 atmosphere for the annealing can help to eliminate the roll-in scale and reduce the reaction of graphite formation in the annealing. The problem of "Lath Graphite" defect formed on the steel surface can be greatly improved accordingly.