In this study, powder metallurgy and severe plastic deformation by high-pressure torsion (HPT) approaches were combined to achieve both full density and grain refinement at the same time. Water-atomized pure iron powders were consolidated to disc-shaped samples at room temperature using HPT of 10 GPa up to 3 turns. The resulting microstructural size decreases with increasing strain and reaches a steady-state with nanocrystalline (down to ~250 nm in average grain size) structure. The water-atomized iron powders were deformed plastically as well as fully densified, as high as 99% of relative density by high pressure, resulting in effective grain size refinements and enhanced microhardness values.