Nanocrystalline Fe78B13Si9 alloy powders were prepared by ball milling of amorphous and crystallized ribbons as well as by mechanical alloying of elemental powders mixture. Ball milling produces nanocrystalline supersaturated alpha -Fe(Si,B) solid solution for all the materials used. Mechanical crystallization of the amorphous phase is sufficient for the nucleation of the crystalline phase, even after short milling. Further milling is responsible for an increase in the crystalline phase fraction and grain growth processes. In the case of milling crystalline materials (mixture of crystalline powders or crystallized ribbon), continuos refinement of the microstructure was observed. The grain refinement to the nanometer range is accompanied by an increase in atomic-level strain.