In this study we have characterized the fatigue behavior of a low-alloy powder metallurgy (P/M) sintered steel, composed mainly of martensite and bainite with 10.4% porosity. After each processing step, the residual axial surface stress was measured by X-ray diffraction. Significant compressive surface stresses were generated during the machining of the fatigue specimens. A heat-treatment at 175°C after machining had no effect on these residual stresses, but polishing the surface resulted in a 20% reduction in compressive stresses. The residual surface stresses had no apparent effect on the fatigue behavior of the sintered steel. Rather, the fatigue behavior was controlled by sub-surface defects consisting of weakly bonded particles located in regions of high porosity.