Nano-nitride reinforcement of Fe–Cr alloys are under intense investigations, e.g., along with oxide-strengthened, nitride-strengthened reduced activation steels with superior high temperature mechanical properties are developed as materials for nuclear energy applications. Fe14Cr alloy powders were produced by mechanical milling for up to 170 h under a nitrogen atmosphere followed by heating under an Ar5%H2 atmosphere to 600°C–1120 °C. The samples were investigated by means of X-ray diffraction, DTA/TG and magnetic measurements. CrN, detected after milling for 58 h, reached 39 wt % (5.3 wt.% total N) at 170 h milling. The ferrite supersaturated with nitrogen shows a strong decrease in grain size and saturation magnetization, an increase in lattice constant, microstrain and coercivity, Hc. Upon heating, the metastable ultrafine α-ferrite and CrN in the as-milled samples undergo transformations and recrystallization into ferrite grains free of supersaturation, whose microstructure follows a continuous relaxation. The supersaturation with nitrogen was retained upon heating in the relatively stable ferrite crystalized at the milling stage. This microstructure undergoes a discontinuous relaxation in the 800°C–1120 °C region: a pronounced decrease of grain size (down to ∼25 nm), an increase of lattice constant, microstrain and Hc. These improvements were associated with features of discontinuous precipitation reaction of coherent nitride precipitates (involving a new α”-phase with expanded lattice), in connection with the heating in the austenite phase field. Such microstructure refinement or (nitride) strengthening of Fe14Cr alloys can be achieved on powders milled for much less time as compared to previously reported (oxide dispersion) strengthening of Fe14Cr–W–Ti ferritic steels.