In the recent years, the addition of nitrogen to iron alloys by mechanical alloying has attracted considerable attention. In this paper, mechanical alloying of Fe–18Cr–8Mn powder mixture under a nitrogen atmosphere is considered from the viewpoints of nitrogen supersaturation and phase transformation. By progression of milling, austenitization and amorphization transformations are detected. The contribution of interstitial sites of the nanocrystalline phases to the nitrogen supersaturation is estimated by X-ray diffraction experiments. It is found that the contribution is progressively decreased by increasing the total nitrogen content. Typically, only about 4% of total incorporated nitrogen is distributed among the crystal interstitial sites of the Fe–18Cr–8Mn–2.5N alloy.