It was predicted that TbCu7-type Sm-Fe powder prepared by the low-temperature reduction-diffusion (LTRD) process using a Li-Ca reductant would contain no residual ɑ-Fe because this reductant would not produce the absorbed water that hinders the reaction between Sm and Fe by forming oxychlorides when molten salt is used as the reductant. Contrary to this expectation, a detailed microstructure analysis revealed that a residual phase of unreacted ɑ-Fe existed in some TbCu7-type Sm-Fe particles rather than as separate Fe particles. This residual ɑ-Fe phase was not located in the center of the Sm-Fe particles and was not detected in some Sm-Fe particles, suggesting that the reason for the residual ɑ-Fe phase is inhomogeneous diffusion of Sm into the Fe due to slow diffusion at low temperatures. Although this TbCu7-type Sm-Fe powder contained a small amount of unreacted ɑ-Fe phase, the magnetic properties of the nitride TbCu7-type Sm-Fe were also estimated. •The possibility synthesizing single-phase TbCu7-type Sm-Fe powder was investigated.•The residual α-Fe phase was smaller than in the case using molten salts.•ɑ-Fe phases are not located in the center of some TbCu7-type Sm-Fe particles.•It is inferred that the reduced Sm was inhomogeneously diffused into the Fe.•The coercivity of the TbCu7-type Sm-Fe-N powder was estimated as Hc = 5.5 MA·m-1