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Mechanical milling of Mg 1 − x Fe x B 2 with x =0–0.4 led to the formation of amorphous phase. For x =0, the hexagonal MgB 2 phase was formed after a heat treatment at 450 °C or above with critical temperature T c =38–40 K. Fe-substituted MgB 2 phase was formed after annealing at 450 °C or above when x =0.05, 0.1 and 0.2. Fe solubility in the MgB 2 phase decreased with increasing annealing temperature, while lattice parameters ( a and c ) decreased. It has been found that critical temperature T c increased with increasing annealing temperature. For Mg 0.6 Fe 0.4 B 2 powder, MgB 2 phase could not be formed after crystallization. Single solid-solution MgB 2 phase could be formed in Mg 0.95 Fe 0.05 B 2 after annealing at 450 °C. This sample exhibited paramagnetic between 30 and 290 K with a high magnetic moment of μ Fe =5.5–6.0 μ B . An anomaly (minimum in reciprocal magnetic susceptibility) was observed below 30 K, accompanied by magnetic splitting in Mossbauer spectroscopy.