Laser directed energy deposition (LDED) can be deployed for depositing high-performance materials for various engineering applications. Alumina-forming steel is a high-performance material that possesses excellent corrosion and oxidation resistance, finding application in the power generation sector. In the present work, LDED using powder feeding (LDED-PF) was used to deposit Fe20Cr5.5AlY alloy using single-track, multi-track, and multi-layer deposition on SS 316L substrate. Response surface methodology (RSM)-based optimization was used to optimize the single-track deposition. The relationship between the track geometry parameters and the build rate with the LDED-PF processing parameters was studied. Further, the nonlinear relationship among the major process parameters was developed and an analysis of variance (ANOVA) was utilized to find significant parameters. The multi-track deposition yielded densely clad layers with a columnar grain structure. The presence of complex oxide slag of Y, Al, and Zr on the clad layer was detected. A micro-hardness of 240–285 HV was observed in the clad layer, with a hardness of 1088–1276 HV at the slag layer. The multi-layered structures showed a relative density of 99.7% with columnar growth and an average microhardness of 242 HV. The study paves the way for the deposition of dense alumina-forming steel structures for building components for power generation applications.