Transformation reaction induced due to ball-milling of iron oxide, alpha-Fe2O3 in both air and oxygen atmospheres under closed milling condition has been studied for detailed characterization of the microstructure of all the evoluted phases on milling up to 10h. The methodology adopted for characterization involves Rietveld's whole X-ray profile fitting technique adopting the most recently developed software, material analysis using diffraction (MAUD), which incorporates Popa model for crystallite (domain) size and microstrain (root mean square, r.m.s. strain). The analysis also considers lattice defect related features of the microstructure, viz. stacking, twin, compound fault density and dislocation density parameters. The study also undertakes quantitative estimation of volume fractions of the phases evoluted (Fe3O4: Fd-3m:1 and FeO: Fm-3m). The results reveal transformation of alpha-Fe2O3 to Fe3O4 and finally to FeO occurs in both air and oxygen atmospheres, and the reaction speed is slower in oxygen environment. The reaction is controlled by oxygen partial pressure, which decreases on continued milling. A critical oxygen partial pressure is reached at 3-4 h of milling, when Fe3O4 phase attains maximum saturation with nano-order (7-8 nm) crystallite sizes, reduced r.m.s. strain and high dislocation density (similar to10(12) cm(-2)). Prolonged milling (7-10 h) results in further reduction of oxygen partial pressure, resulting in complete transformation of alpha-Fe2O3 and Fe3O4 to FeO, having nano-order (6-7 nm) crystallite sizes, high r.m.s. strain (similar to10(-2)) andhigh dislocation density values (similar to10(12) cm(-2)) in both the environments, except that the transformation reaction is slowed down in oxygen. (C) 2003 Elsevier B.V. All rights reserved.