Tensile strength and fracture toughness of uniaxially compacted spray-dried ferrite powders, with and without external lubricant were measured. The addition of external lubricant significantly increased the fracture strength and decreased the strength variability. The external lubricant also led to an increase in fracture toughness and a decrease in the critical flaw size. Scanning electron microscopy examination of fracture surfaces showed an increase in the amount of transgranular fracture for the pellets compacted from the externally lubricated powder. It was concluded that the external lubricant strengthened the bonds between the spray-dried granules, thereby increasing the fracture toughness and reducing the critical flaw size. X-ray tomography of pellets showed that there was no appreciable difference in density gradients between the samples.