Reactive hot pressing of TiC-B4C precursors was undertaken at 1800 ℃ to produce TiB2 with carbon inclusions. Atomic mechanisms of titanium diboride nucleation, as well as spongelike carbon inclusions and submicron platelets of graphite precipitation has been investigated. Precursor grain size, green body composition and synthesis time were varied to analyse phases transformation. Boron from B4C grain sublimation is shown to result in carbon-based foam formation. Ab-initio calculations confirm that the boron atoms accumulation on (111) TiC plains leads to tensile stress. The developed stress cleaves TiC grains and enhances further reaction. Most of carbon expelled from TiC during its transformation into TiB2 forms graphite platelets.