A novel PM (powder metallurgy) steel for automotive power-train gear components was developed to reduce manufacturing cost, while meeting application requirements. The high-density PM steel was manufactured by mixing using special Cr-Mo atomized iron powders, high-pressure compaction, and sintering. Tensile strength, charpy impact, bending fatigue, and contact fatigue tests for the PM steel were carried out and compared to conventional forged steel. Pinion gears for auto-transmission were also manufactured by helical pressing, sintering, and surface densification process. In order to evaluate the durability of the PM parts, auto-transmission durability tests were performed using dynamometer tests. Results showed that the PM steel fulfilled the requirements for pinion gears indicating suitable tensile, bending fatigue, contact fatigue strengths and improved gear tooth profile. The PM gears also showed good performance during the transmission durability tests. As a result, the PM gears showed significant potential to replace the conventional forged steel gears manufactured by tooth machining (hobbing, shaving, and grinding) processes.