The evolution of microstructure of Ni and NaCl mixtures formed by mechanochemical reaction and mechanical milling has been studied using X-ray diffraction, electron microscopy and magnetic measurements. Separate nano-sized Ni particles were formed by continuous solid-state reaction of NiCl2 + 2Na during mechanical milling. Further milling resulted in the growth of clustered particles due to inter-particle welding during collision events. On the other hand, milling of micron-sized Ni and NaCl powders resulted in a layered particle morphology and continuous decrease in particle size with increasing milling time.