Mechanical alloying technique was applied to prepare hard magnetic compound powders. Staring from pure Fe and Sm powders, the formation process of hard magnetic phase by mechanical alloying and subsequent solid state reaction was studied. As milled powders were found to consist of Sm-Fe amorphous and -Fe phases in all compositions of (x = 11, 13, 15, 17). The effects of starting composition on the formation of intermetallic compound was investigated by heat treatment of mechanically-alloyed powders. When Sm content was 15 at.%, heat-treated powders consisted of nearly single phase. For preparation of hard magnetic powders, additional nitriding treatment was performed under gas flow at 45. The increase in the coercivity and remanence was proportional to the nitrogen content which increased drastically at first and then increased gradually as the nitriding time was extended to 3 hours.