Nanostructured alloys have great potential as soft magnetic materials. In particular, nanocrystalline Fe-Co based alloys are believed to be good candidates for imparting improved magnetic behavior in terms of higher permeability, lower coercivity, reduced hysteresis losses and higher Curie temperatures. In the present work, Fe-50at. % Co alloy powders have been prepared using mechanical alloying (MA) in a planetary ball mill under controlled environment. The particle size and morphology of MA powders was investigated using scanning electron microscopy. The crystal size and internal strain was measured using X-ray diffraction. It has been shown that the crystal size could be reduced down to less than 15 nm in these alloys. Finally, the influence of grain size and internal strain on the magnetic properties has been discussed.