The mechanisms of nitriding during atomization of molten iron and cast iron with nitrogen and subsequent cooling of the powders in oil and nitrogen are studied. The amount of nitrogen absorbed by the melt droplets during atomization is determined mostly by the solubility of nitrogen in the melt. On solidification, a part of nitrogen forms nitrides, the remaining part is dissolved forming a superequilibrium solid solution. The amount of nitrogen in the solid solution increases with the cooling rate. With the powders cooled in nitrogen, solid-phase nitriding processes dominate and their role increases with the increase of the specific surface of the powder. The lower rate of gas cooling compared with liquid cooling promotes the formation of a structure closer to equilibrium and the appearance of strong-bonded nitrogen containing compounds. A part of nitrogen is retained in the adsorbed form. The nitrogen-content of the powders decreases on storage owing to desorption.