In the present paper, a practical thermal treatment process has been introduced to stress relieve the iron powders in a soft magnetic composite. The composites were pressed and treated at different pressures and temperatures. Also, some of the samples were treated for various periods of time at 200uC. Density, electrical resistivity and transverse rupture strength of the samples were measured and fracture surfaces were studied by SEM. A series of tests were performed to determine the DC magnetic properties of the samples. It has been shown that there are optimum amounts of resin content and compaction pressure and temperature, rather than time is the dominant factor in stress relief of the iron powders.