Nanocrystalline Fe-Co alloy powders, which were prepared by high-energy mechanical milling, were nitrided under the mixing gas of NH3/H2 in the temperature range from 380°C to 510°C. X-ray diffraction (XRD) was used to analyze the grain size and reaction during the processing. The magnetic properties of the nitrided powders were measured by Vibrating Sample Magnetometer (VSM). The results show that with the appearance of Fe4N phase after nitride treatment, and the grain-size of FeCo phase decreases with the increase of nitridation temperature between 380°C to 450°C.The saturation magnetization of nitrided alloy powder treated at 480°C is about 18% higher than that of the initial Fe-Co alloy powder, accompanied by the reduction of the coercivity. Transmission electron microscope (TEM) was used, attempting to further analyze the effect of Fe4N phase on microstructure and magnetic properties of the powder mixtures.