Metastable Fe-Pd powder samples were synthesized by mechanically activated solid-state diffusion using high-energy ball milling. The Fe and Pd alloying and the hydrogen effect on this process were followed by preparation of two samples: the A-sample was a mixture of Fe powder and of Pd powder pre-charged with hydrogen (PdH) and milled under Ar atmosphere, the B-sample was a mixture of the Fe and Pd powders milled under hydrogen atmosphere. The fundamental properties, i.e., chemical and phase composition, lattice parameters, microstructure, morphology, grain size, defect structure, and macro- and micro-magnetic properties, were monitored after several steps of the alloying at room and appropriately at elevated temperatures. The alloying of Fe and Pd in both samples begins already after 5 h of milling and two phases are formed, the dominating bcc-Fe(Pd) phase and a minor fraction of the fcc-Pd(Fe) phase. The occurrence of the fcc phase, not observed previously by solid-state diffusion under argon atmosphere, is ascribed to mainly a positive effect of hydrogen reducing the formation energy of lattice defects and facilitating their formation. Consequently, the moving defects during mechanical alloying make the solid-state diffusion of Pd into bcc-Fe lattice and Fe into fcc-Pd lattice easier. On the other hand, hydrogen used as atmosphere in the milling procedure is adsorbed on the particle surfaces and after the vial opening hydrogen atoms form water molecules with oxygen from air. This exothermic reaction causes a removal of hydrogen atoms from the particle surface which thus becomes more sensitive to oxidation. Nothing similar was observed after mechanical alloying under argon atmosphere having positive impact on the particle surface stability. (C) 2017 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.