The preparation of (Sm-Co)+Fe nanocomposite magnetic powder has been tried by mechanical alloying (MA) and subsequent heat treatment. The powder annealed at comparatively low temperature.in vacuum after MA was composed of fine grains whose size was 10-30nm in diameter and showed superior magnetic properties. When the annealing temperature was raised to 1073K, most of a -Fe was consumed for the growth of 2-17 phase. This consumption of a-Fe and the growth of 2-17 phase resulted in the decrease of the remanence and coercivity. The powder to which Fe was not added showed low remanence, and its maximum energy product was as low as 38.7kJ/m3. On the other hand, remanence enhancement was found in the powder to which Fe was added, and the remanence increased with increasing Fe concentration. Though the shape of demagnetization curve varied with Fe concentration, the maximum energy product of about 100kJ/m3 was obtained for both high and low Fe. concentration samples. Such superior magnetic properties seemed to be the result of exchange interactions between hard phase and soft phase.