This paper reports the effects of annealing on the magnetic properties of ultrafine Nd-Fe-B powders with an average particle size of 0.67 mu m. The powder was fabricated from hydrogenation disproportionation-desorption-recombination (HDDR)-treated Nd-Fe-B alloys by hydrogen decrepitation and helium jet milling. The coercivity of the ultrafine powders was slightly increased by annealing below 500 degrees C, and was drastically increased by annealing above 600 degrees C. These two stepwise increases in coercivity were attributed to hydrogen desorption and formation of a liquid Nd-rich phase. In addition, after annealing below 500 degrees C, the coercivity (mu H-0(c)) of the ultrafine powder was higher than that of the conventional powder, which was prepared from a strip-cast Nd-Fe-B alloy power with a particle size of 1.12 mu m, because of a decrease in particle size. In contrast, after annealing above 600 degrees C, the mu H-0(c), of the ultrafine powder was smaller than that of the conventional powder. The rare earth element content (Nd + Pr) was lower in the ultrafine powders than in the conventional powder. These results indicate that the rare earth element content was insufficient in the ultrafine powders.