In this study, p-type $(AgSbTe_2)_{15}(GeTe)_{85}$: TAGS-85 compound powders were prepared by gas atomization process, and then their microstructures and mechanical properties were investigated. The fabricated powders were of spherical shape, had clean surface, and illustrated fine microstructure and homogeneous $AgSbTe_2$ + GeTe solid solution. Powder X-ray diffraction results revealed that the crystal structure of the TAGS-85 sample was single rhombohedral GeTe phase, which with a space group $R_{3m}$. The grain size of the powder particles increased while the micro Vickers hardness decreased with increasing annealing temperature within the range of 573 K and 723 K due to grain growth and loss of Te. In addition, the crystal structure of the powder went through a phase transformation from rhombohedral ($R_{3m}$) at low-temperature to cubic ($F_{m-3m}$) at high-temperature with increasing annealing temperature. The micro Vickers hardness of the as-atomized powder was around 165 Hv, while it decreased gradually to 130 Hv after annealing at 673K, which is still higher than most other fabrication processes.