A computational model of the formation of welding fume in arc plasmas, under conditions occurring in metal-inert-gas (MIG) and metal-active-gas (MAG) welding, is presented. The model couples the chemical kinetics occurring in high-temperature mixtures of iron vapour, oxygen and argon with a moment model of the nucleation and growth by condensation of iron and iron oxide nanoparticles. Results are presented for different iron vapour concentrations, oxygen-to-argon ratios, and quench rates. It is found that the presence of oxygen has important effects on the gas-phase chemistry and the properties of the nanoparticles. FeO nanoparticles are preferentially nucleated, and have smaller diameter than the Fe nanoparticles that are produced in the absence of oxygen. The final composition of the nanoparticles depends on the relative concentrations of iron and oxygen in the plasma. A three-dimensional arc model that includes vaporization of the wire electrode is used to predict temperature, velocity and iron vapour mass fraction distributions in typical MIG and MAG welding conditions. Calculations of nanoparticle formation and growth along streamlines confirm the importance of oxygen in determining the fume particle properties.