Recent work has shown that using a lower-cost water-atomised stainless steel powder for multiple layer laser deposition is functionally possible, and can produce parts with final properties equivalent to, or in some respects better than, gas-atormsed powder. Before the feasibility of using water-atomised powders in growing fields such as rapid tooling can be determined, it is essential that the behaviour of more appropriate materials be investigated. This paper reports work using a CO, laser and coaxial powder feed head to compare the characteristics of water- and gas-atomised H13 tool steel during the deposition process. The dimensions and geometries of the deposited tracks, and the final material microstructures are examined, and significant differences arising from the type of atomisation method are revealed. Possible explanations for the observed phenomena are discussed. (C) 2003 Elsevier B.V All rights reserved.