Nanocrystalline Sr2FeMoO6 (SFMO) of double perovskite structure has been successfully synthesized by mechanical activation (MA) in air using SrO, Fe2O3, and MoO2 as the starting materials. Magnetization of the polycrystalline SFMO derived from MA increases with increasing MA time. Similarly, the magnetoresistance (MR) effect also increases with increasing MA time up to 25 h, which is ascribed to the elimination of SrMoO4 impurity phase and the refinement in grain size of the polycrystalline double perovskite phase. Prolonged MA adversely affects the MR effect, where Fe contamination was evidenced.