A new process has been developed for the synthesis of nanocrystalline AlN powder by the nitridation of coarse aluminum powder in flowing NH3 gas, using NH4Cl and KCl as additives. The resulting powders have been characterized using XRD, TEM, and XRF techniques. XRD-pure AlN nanoparticles with a diameter of 10-20 nm can be obtained by nitridation at 1273 K for 5 h. NH3 is proved to eliminate the effect of water impurity. The effects of the additives on the conversion of aluminum are also discussed.