Liquid metal dealloying is a recently developed method to elaborate micro and nano-porous materials. It consists of the selective dissolution of an alloying element from a precursor alloy by immersing it in a liquid metal bath. In this paper, we monitor the dealloying reaction of Invar (Fe65Ni35) powders in liquid Mg using in situ synchrotron X-ray diffraction. Rietveld refinement of the diffraction spectra enables quantifying the evolution of different crystalline phases throughout the process, thereby gaining new insights into the kinetics, phase equilibria, and the role of intermetallics on the reaction. These results are systematically compared to post mortem observations of dealloyed samples, showing a good agreement between both techniques. In particular, we show that adjusting the thermodynamic conditions of the reaction (temperature, FeNi/Mg ratio) enables to tailor the microstructure of the dealloyed powders, by modifying the dealloyed fraction to achieve core–shell structures, and altering the composition of ligaments.