An improved smoothness of the Nd-rich/Nd2Fe14B grain interface after annealing is confirmed by detailed microstructure characterization. The crystal structure of the Nd-rich phase adjacent to matrix grain changes from double hexagonal close packed to face-centered cubic (fcc). The fcc-Nd-rich/Nd2Fe14B grain interface approaches coherency with the misfit, ∼4.2% in the present case. This suggests that an atomically smooth and stress-minimized Nd-rich/Nd2Fe14B grain interface reduces the probability of reversed domain nucleation and recovers the coercivity. In addition, oxygen content will play an important role in controlling the interface smoothness.