The magnetostrictive composite material such as Terfenol–D, is composed of magnetostrictive particles dispersed within a polymer matrix, which is used to bind these particles to a relatively tough material, and the binder creates an insulating layer between the particles which increases the receptivity and reduces eddy current losses at high frequencies operation. Hong et al. reported that the maximum magnetostriction of 5.4×10⁻⁵ was obtained in a composite made by mixing the spherical Fe–Ga particles prepared by spark erosion in liquid Ar with epoxy of 48% volume fraction and curing in a magnetic field. Gaudet et al. investigated firstly the Fe–Ga powders prepared by mechanical alloying. Their results suggested that a disordered bcc A2 phase with no indication of any ordered DO₃ phase was observed in these powders. Unfortunately, in their report, they also did not describe how to bond powders into a composite and how its magnetostrictive performance was. In present study, the spherical Fe–Ga particles were prepared by gas atomization and their microstructures were investigated by XRD, DTA, SEM and EDS. The results demonstrate that the Ga concentration of gas–atomized particles is near the nominal composition of Fe₈₁Ga₁₉ and most of particles are polycrystallne mainly composed of A2 phse and a small amount of ordered DO₃ phase. It is found that L1₂ phase appeared in the Fe₈₁Ga₁₉ annealed powders is detimental to improvement of magnetostriction. However, many single crystals were obtained due to crystallization during annealing, which is beneficial to increasing the magnetostriction. The bonded magnetostrictive composite was prepareby magneticallaligning compression molding Fe₈₁Ga₁₉ powders and epoy. The maximum saturation magnetostriction of 6.4×10⁻⁵ is obtained in the composite containing annealed powdes.