Cold spray additive manufacturing (CSAM) is an attractive solid‐state bonding technique due to its rapid manufacturing rate and the ability to avoid deleterious effects found in solidification‐based additive manufacturing. Unfortunately, CSAM of steel components has been difficult to date to the high strength of the steel particles which resists deformation and creates interparticle porosity. Herein, it is found adding softer Cu powder particles to steel (SS316) powder and utilizing a heat treatment can decrease the porosity of the as‐sprayed structure while increasing the mechanical properties. The mixture results in an increased sprayability of the structure, as the Cu particles preferentially fill the pores, increasing the density. The microstructural evolution of the SS316 and Cu particles at the particle interfaces and interiors is investigated and reveals that the materials undergo a heterogeneous deformation route which facilitates the densification of the CSAM structure. Through annealing these components, the tensile strength increases and the density increases further. Both materials undergo microstructural recovery along with selected interdiffusion of elements which improves the metallurgical bonding. It is demonstrated that the heterogeneous deposition and microstructural evolution between the dissimilar materials can improve the overall component properties.