The purpose of this study is to develop a new type of coated wire electrode for fine-wire EDM. A piano wire with a very high tensile strength is coated with an electrically conductive brass layer to achieve high-speed and high-precision wire EDM. In our previous studies, by using a thin wire of 50 μm in diameter, the thickness and quality of the brass coating layer were optimized, and the effect of surface unevenness was also discussed. In this paper, the effects of the oxidation of the wire surface and high-resistance layer on the wire electrode were experimentally investigated. It was found that more sparks occur selectively in front of the wire and less sparks on the side surface of wire with the high-resistance layer on the wire surface. Consequently, the kerf width decreased and the removal rate increased with the optimum thickness of the layer. Also, the occurrence of a short circuit between the wire and the machined surface was reduced because of presence of a high-resistance layer on the wire surface.