PURPOSE: To reduce the irregularity in grain diameter of powder as well as to contrive improvement in orientational property of powder grains by a method wherein, after the intermetal compound to be turned into raw material has been homogenously annealed at the temperature of 1000°C or above, the intermetal compound is quenched immediately.

CONSTITUTION: After a specific heat treatment, namely, a homogenous annealing at a suitable temperature of 1000°C or above, has been performed on the rare earth alloy (intermetal compound) to be turned into raw material as the foreprocessing for formation of the rare earth alloy into fine powder, a quenching process is added to an oil bath and the like. By performing the homogenous annealing and the quenching operations on the alloy as above- mentioned, the constitution and the composition of the raw material alloy can be made uniform, and the grain diameter distribution of the manufactured powder has a very steep peak centering around 3 microns. As a result, the orientational property of the powder when a magnetic field is formed can be enhanced, and its magnetic characteristics can also be improved.