Mechanical alloying technique was applied to prepare hard magnetic $Sm_2Fe_{17}N_x$ compound powders. Staring from pure Fe and Sm powders, the formation process of hard magnetic $Sm_2Fe_{17}N_x$ phase by mechanical alloying and subsequent solid state reaction was studied. As milled powders were found to consist of Sm-Fe amorphous and $alpha$-Fe phases in all compositions of $Sm_xFe_{100-x}$(x = 11, 13, 15, 17). The effects of starting composition on the formation of $Sm_2Fe_{17}$ intermetallic compound was investigated by heat treatment of mechanically-alloyed powders. When Sm content was 15 at.％, heat-treated powders consisted of nearly $Sm_2Fe_{17}$ single phase. For preparation of hard magnetic $Sm_2Fe_{17}N_x$ powders, additional nitriding treatment was performed under $N_2$ gas flow at 45$0^{circ}C$. The increase in the coercivity and remanence was proportional to the nitrogen content which increased drastically at first and then increased gradually as the nitriding time was extended to 3 hours.