Peridotite xenoliths from the subarc mantle, which have been rarely documented, are described from Iraya volcano of the Luzon arc, the Philippines, and are discussed in the context of wedge-mantle processes. They are mainly harzburgite, with subordinate dunite, and show various textures from weakly porphyroclastic (C-type) to extremely fine-grained equigranular (F-type). Textural characteristics indicate a transition from the former to the latter by recrystallization. The F-type peridotite has inclusion-rich fine-grained olivine and radially aggregated orthopyroxene, being quite different in texture from ordinary mantle-derived peridotites previously documented. Despite their strong textural contrast, the two types do not show any systematic difference in modal composition. The harzburgite of C-type has ordinary mantle peridotite mineralogy; olivine is mostly Fo91-92 and chromian spinel mostly has Cr#s (= Cr/[Cr + Al] atomic ratios) from 0.3 to 0.6. Olivine is slightly more Fe-rich (Fo89-91) and spinel is more enriched in Cr (the Cr#, 0.4-0.8) and Fe3+ in F-type peridotites than in C-type harzburgite. Orthopyroxene in F-type peridotites is relatively low in CaO (<1 wt%), Al2O3 (<2 wt%) and Cr2O3 (<0.4 wt%). The F-type peridotite was possibly formed from the C-type one by recrystallization including local dissolution and precipitation of orthopyroxene assisted by fluid (or melt) of subduction origin. Textural characteristics, however, indicate a deserpentinization origin from abyssal serpentinite of which protolith was a C-type peridotite. In this scenario the initial abyssal serpentinite was possibly dehydrated due to an initiation of magmatic activity beneath an incipient oceanic arc like Batan Island. The F-type peridotite is characteristic of the upper mantle of island arc, especially of incipient arc.