The role of strain gradient on strengthening and grain refinement into nanometer scale during severe plastic deformation was studied in iron by using ball milling (BM) and high-pressure torsion (HPT) processes. Layered nanocrystalline structure with a thickness of around 100nm or less was successfully produced by these processes. The hardness obtained by BM or HPT was more than twice as high as the maximum hardness obtained by homogeneous deformation processes such as equal-channel angular pressing, accumulative roll-bonding or cold-rolling. At the center of the HPT-processed disk, where the shear strain is theoretically zero, the hardness increased with number of turns. The results of BM and HPT experiments show clearly that the strain gradient contributes significantly to strengthening and grain refinement.