An investigation of the effect of heating rates on the densification behavior of carbonyl iron powder compacts, particularly on the exaggerated grain growth during the α-γ phase transformation, was carried out in this study. Compacts heated at 1200 °C/min and then sintered for 90 minutes at 1200 °C attained 7.14 g/cm3, while those heated at 10 °C/min reached only 6.61 g/cm3. Dilatometer curves using heating rates of 2 °C/min, 5 °C/min, 10 °C/min, 30 °C/min, and 90 °C/min demonstrate that 90 °C/min yields the highest sintered density. The microstructure analysis shows that high heating rates inhibit exaggerated grain growth during the phase transformation by keeping the interparticle neck size small and pinning the grain boundaries. This explanation is supported by the calculation that shows that the energy barrier preventing the grain boundary from breaking away from the neck is reduced hyperbolically as the neck size and the amount of shrinkage increase. The high heating rate, however, shows little beneficial effect for materials that have no allotropic phase transformation or have less drastic grain growth during heating, such as nickel and copper. Thus, bypassing the low temperatures to suppress the surface diffusion mechanism, which does not contribute to densification, is ruled out as the main reason for the enhanced densification of carbonyl iron powders.