It is well known that metals are strengthened by alloying additions or finely dispersed precipitates of a second phase. Here we show that alloying pristine, defect-free single crystalline nickel nanoparticles with iron results in a counter-intuitive softening due to randomly distributed solute (Fe) atoms and nano-size precipitates of the ordered Ni3Fe or Fe-rich phases. The Ni-Fe particles with Fe concentration of 0-50 at.% were synthesized by solid-state dewetting of Ni-Fe bilayer thin films deposited on a sapphire substrate. Ni-27Fe and Ni-50Fe particles exhibited a bimodal size distribution with small (111) and large (100) oriented particles. The solid solution softening was observed in all particles. The precipitation softening was observed in (100) oriented Ni-27Fe particles with uniformly distributed ordered Ni3Fe (L12) precipitates. Fe-rich precipitates were found on the surfaces and near the edges of the highly alloyed Ni-50Fe particles, leading to even greater softening. Molecular dynamic simulations of particle deformation have demonstrated that the softening effect is associated with premature dislocation nucleation at sites with a local stress concentration caused by the randomly distributed solute atoms. This work illustrates how the classical hardening mechanisms operating in bulk materials can be manipulated and even reversed in defect-free single-crystalline metal nanoparticles whose plastic deformation is controlled by dislocation nucleation.