In this study we investigated the oxygen effect on the nucleation and its residual stress during unbalanced magnetron sputtering. Up to 0.5% in oxygen flow rate, cubic phase (c-BN) was dominated with extremely small fraction of Hexagonal phase (h-BN) of increasing trend with oxygen concentration, whereas hexagonal phase is dominated beyond 0.75% flow rate. Interestingly, the residual stress in cubic-phase-dominated films was substantially reduced with small amount of oxygen (${sim}0.5%$) down to a low value comparable to the h-BN case. This may be because oxygen atoms break B-N $sp^3$ bonds and make B-O bonds more favorably, increasing $sp^2$ bonds preference, as revealed by FTIR and NEXAFS. It was confirmed by experimental facts that the threshold bias voltage for nucleation and growth of cubic phase were increased from -55 V to -70 V and from -50 V to -60 V respectively. The reduction of residual stress in O-added c-BN films is seemingly resulting from the microstructure of the films. The oxygen tends to increase slightly the amount of h-BN phase in the grain boundary of c-BN and the soft h-BN phase of 3D network including surrounding nano grains of cubic phase may relax the residual stress of cubic phase.