In current work, Nd15−xDyxFe77.5B7.5 (at%) nanoparticles with different Dy-content (x=0.0, 0.5, 1.0, 1.5, 2.0, 2.5, 3.0) were synthesized by sol–gel method followed by a reduction-diffusion process. The effects of Dy on the magnetic properties and the relations between the microstructure and the coercivity of Dy-substituted Nd–Fe–B nanoparticles have been studied. The coercivity of Nd–Fe–B nanoparticles with the addition of Dy first increase, reaches a maximum, and then starts to decrease. The coercivity of Dy-substituted Nd–Fe–B nanoparticle synthesized by sol–gel method increased from 938.9 to 1663.9kA/m while the remanence decreased slightly from 1.16 to 1.06T. The results show that with an increase in Dy content the variation of maximum energy product ((BH)max), lowest-order uniaxial magnetocrystalline anisotropy constant (Ku1), and Curie temperature (Tc) had a trend as same as the coercivity. The Henkel plot showed that the existence of exchange coupling interaction between grains, and the exchange coupling interactions increased with increasing x from 0.0 to 2.0 and then decrease with further increasing x≥2.5. The optimum magnetic properties of Nd–Fe–B nanoparticles with (BH)max =40.38 MGOe, Hc=1663.9kA/m, Br=1.08T were obtained by substituted 2.0at% Dy. The effects of increasing temperature on magnetic properties of Dy-substituted Nd–Fe–B nanoparticle magnets with 2.0at% Dy was investigated. The reduced spin-reorientation temperature was obtained for Dy-substituted Nd–Fe–B nanoparticles with 2.0at% Dy. Below 100K a spin-reorientation transition was takes place. The temperature coefficient of coercivity (β) was −0.36, −0.46, −0.41, −0.34, −0.29, −0.24, −0.25%/°C at different temperature 50, 100, 150, 200, 250, 300, 350°C, respectively. Mössbauer spectroscopy was applied to study the composition and properties of Dy-substituted Nd–Fe–B magnet. Microstructure analysis showed a homogeneous distribution of Dy in produced samples. The possible reason for observed magnetic behavior is improving the intrinsic material parameter and optimizing the microstructure by a uniform enhancement of magnetocrystalline anisotropy by formation the nanocrystalline compound (Nd,Dy)2Fe14B.