The effect of diamond surface pretreatment and content on the microstructure and mechanical properties of NiAl/Fe–x diamond (x=0,5,10,15,and 20 wt.%) alloys was investigated after mechanical alloying with subsequent hot-pressing sintering. The results showed that after the surface pretreatment, a complete transition layer containing W existed on the outer surface of the diamond grains, which improved the interfacial bonding strength of the diamond grains and NiAl/Fe matrix to an excellent level. As the diamond content increased, the compressive strength of the NiAl/Fe-based alloys declined, but the alloy with 10 wt.% diamond had a higher value than that of the other NiAl/Fe-based alloys. Short cracks and transgranular fracture were observed in the fracture surface of all materials. For the material with 20 wt.% diamond, intergranular fracture was obvious, and many diamond particles appeared along the fracture direction, which caused the compressive strength to be the lowest of the samples considered in this study. After the addition of diamond, the oxidation resistance of NiAl/Fe-based alloys decreased due to a loose oxidation layer and diamond graphitization. The thermal conductivity of the alloy first increased and then decreased with increasing diamond content. A NiAl/Fe-based alloy with 15 wt.% diamond demonstrated the maximum thermal conductivity of 53.2 W/(m·k) at 600°C among the samples in this study.