In this paper, a single phase ε-Fe(Si)3N powder was successfully synthesized through the salt bath nitriding reaction method. The flaky FeSi alloy powder was used as the iron source, and non-toxic CO(NH2)2 was used as the nitrogen source. The nitridation mechanism, the preparation technology, the soft magnetic properties, and the magnetization temperature dependence of the powder were studied. The research result showed that ε-Fe(Si)3N alloy powders were synthesized in a high temperature nitrification system after the surface of flaky FeSi alloy powders were activated by a high-energy ball mill. The optimum nitriding process was nitridation for 1 h at 550 °C. The ε-Fe(Si)3N powder had good thermal stability at less than 478.8 °C. It was shown that ε-Fe(Si)3N powder has good soft magnetic properties, and the saturation magnetization of the powder was up to 139 emu/g. The saturation magnetization of ε-Fe(Si)3N powder remains basically constant in the temperature range of 300–400 K. In the temperature range of 400–600 K, the saturation magnetization decreases slightly with the increase of temperature, indicating that the magnetic ε-Fe(Si)3N powder has good magnetization temperature dependence.