Metal bond diamond tools are regularly used in the machining of various hard and brittle materials. The mechanical properties and wear resistance of the metal bond are very important for the tool's life and machining performance. Herein, a low-cost and highly wear resistant Fe3Al bonded material for diamond tool was proposed. A novel two-step reactive sintering method, integrating short-term high-temperature reactive sintering and long-term low-temperature densification sintering, was proposed to prepare Fe3Al bond diamond tools. The effect of sintering temperature on the microstructure and mechanical properties of the Fe3Al bond was examined during one-step reactive sintering. The mechanical properties and tribological characteristics of the one-step and two-step reactive sintered Fe3Al and commercial Fe alloy bond were compared. The machining performance of the two-step reactive sintered Fe3Al bond diamond tool on sapphire was also examined and compared to that of a commercial Fe alloy bond diamond tool. The results showed that the relative density and mechanical properties of the Fe3Al bonded material were enhanced by increasing the sintering temperature during one-step reactive sintering. Moreover, the sample sintered at 1150-850 °C exhibited better mechanical properties and wear resistance compared to the one-step reactive sintered Fe3Al and commercial bond. The grinding ratio of the two-step reactive sintered Fe3Al bond diamond tool was 157 % higher than that of the commercial Fe alloy bond diamond tool.