PURPOSE: To obtain alloy steel powder for a high strength sintered material with superior moldability and compressibility by annealing water-atomized steel powder having regulated C and O contents and contg. a restricted amount of Mn and Cr.

CONSTITUTION: Water-atomized steel powder consisting of, by weight, ≤0.1% C, 0.2W1.0% O, 0.4W7.0% in total of ≤2.5% Mn and/or ≤5.5% Cr and the balance Fe with impurities is subjected to decarburization annealing in an atmosphere of decomposed gaseous ammonia to obtain alloy steel powder for a high strength sintered material. The water-atomized steel powder may further contain a restricted amount of Nb, V, B, Cu, Ni, Co, Mo, Sn, W, P, S, etc. When the resulting steel powder is molded under 5t/cm2 pressure using a lubricant, ≥6.7kg/cm3 grain compacting density and ≤0.9% rattler value are provided, and the molding work is stabilized.