To explore alternative and sustainable feedstock production for metal additive manufacturing, stainless steel powders were fabricated from recycled machining chips by ball milling. To achieve the desirable powder characteristics for additive manufacturing, the effect of ball size on the powder morphology change and particle size reduction was investigated through both theoretical analysis on the maximum deformation depth in the powder during ball milling and extensive experimental work. The modeling results suggest that large balls (diameter = 20 mm) efficiently break up machining chips to coarse powder particles while small balls (diameter = 6 mm) effectively modify the powder morphology to near-spherical. Therefore, a two-stage ball milling approach, i.e., using large balls at the initial stage of milling followed by a second stage of milling with small balls, was proposed in experiments and successfully converted machining chips to powders with near-spherical shape and particle sizes ranged from 38 to 150 μm. In addition, the nanoindentation hardness of the ball milled powder created from machining chips is 56% higher than the gas atomized powder. To verify the usability of the ball milled powder created from recycled machining chips in additive manufacturing, single tracks have been successfully deposited via laser engineered net shaping.