The effect of hydrogen on the structure and magnetic properties of nanocrystalline iron powders was investigated by XRD, Mossbauer spectroscopy and magnetic measurements. The nanocrystalline Fe powders were produced by two methods: iron hydroxide reduction in hot hydrogen how and high-energy ball milling of carboxylic iron in hydrogen atmosphere during 8 h. The formation of nanocrystalline state with mean grain size 13 nm was obtained in both cases. Hydrogen incorporation in the grain boundaries was observed in the nanocrystalline ball-milled iron. Formation of oxy-hydroxide amorphous surface layer was observed in "reduced" sample