A Fe-40Al (at.%) alloy powder having a B2 ordered structure was milled in a high energy planetary ball-mill. The microstructural evolution of the alloy was followed by analysing powder specimens milled for different times by X-ray diffraction, Mössbauer spectroscopy and magnetisation measurements. Grain refinement and chemical disordering were the main transformations resulting from milling. A complete destruction of the long-range order under the adopted conditions of milling was not achieved. From diffraction analyses it was possible to see how the concentrations of such defects as dislocations, planar faults, antiphase domain boundaries, etc., were modified by the heavy deformations involved with milling. Starting from the specimens milled for the longest time, considered in this study, isothermal annealing experiments were carried out to monitor the reverse transformations. The annealing temperatures were selected on the basis of differential scanning calorimetric and thermogravimetric magnetic measurements, which revealed that several transformations occur when treating the deformed powders. Recovery and reordering take place at temperatures ranging from 100 up to 250°C. A complete reordering is possible only at higher temperatures, i.e. 700°C, when recrystallisation is fully accomplished. © 1998 Acta Metallurgica Inc.