PURPOSE: To obtain the titled alloy powder having satisfactory formability by blending alloy powder such as Fe-Si alloy power with metal powder such as Al powder so as to provide a compsn. consisting of specified amts. of Si and Al and the balance Fe, mechanically alloying the blend in a nonoxidizing atmosphere and granulating the alloyed fine particles so as to form porous powder.

CONSTITUTION: One or more kinds of powdery starting materials selected among Fe-Si alloy powder, Fe-Al alloy powder, Fe-Si-Al alloy powder, Fe powder, Si powder and Al powder are blended so as to provide a compsn. consisting of 7W11 wt.% Si, 5W7 wt.% Al and the balance Fe. The blend is put in a vessel such as a mechanical stirring type vibration mill having high energy density, an inert gas such as Ar is introduced and the blend is mechanically alloyed by repeating grinding and mixing in the nonoxidizing atmosphere. The alloyed fine particles are granulated so as to form spherical porous state The resulting Fe-Si-Al alloy powder is suitable for powder metallurgy or for use in the production of an electromagnetic material, paint or the like.