Studies on the evolution of microstructure and phase transformation at various stages of thermal processing have been carried out in 2: 17 type (Sm, Gd)-Co-Fe-Cu-Zr alloys. Microstructural studies reveal that during the solution heat treatment stage, a lamellar structure is formed and its volume fraction is found to be more at 1463 K for alloys without Gd, while at 1473 K for alloys with Gd = 25 wt% of Sm. It appears that the formation of the lamellar structure is closely associated with the phase transformation from Th2Ni17--> (TbCu7 + Th2Zn17) structure during the solution heat treatment. Magnetic measurements in isothermally aged (1123 K) samples showed that the replacement of 25% of Sm by Gd reduces the energy product from 180 to 136 kJ/m(3). The Gd substitution is also found to reduce the temperature coefficient of magnetisation from 350 to 225 ppm/degreesC in the temperature range of 30 - 100degreesC. (C) 2004 Kluwer Academic Publishers.