The surface ordered alloy formation of Ni/Fe(001) overlayer system is explored, using the tight-binding linear muffin-tin orbital (TB-LMTO) method. The alloy formation for one-and two-surface layer of NiFe on Fe(001) are considered by calculating the total and surface formation energies for different configurations of Ni overlayers on Fe(001). The preferred ground states for different configurations are determined and Ni (alloyed with Fe) is found to remain at the Fe surface. The magnetic profile for these configurations is found comparable to the experimental predictions. (001) systems represent an interesting case among the 3d metal overlayers on Fe(001). The coupling between Ni and Fe in the magnetic ground state is ferromagnetic, and the enhancement of the magnetic moments of both metals is reported by theory and experiment [1][2][3][4][5]. An extensive experimental study of Fe and Ni(001) surfaces and the overlayer system (Ni/Fe) show some of the structural changes which depend on the number of Ni layers grown on Fe substrate [5,6]. While previous theoretical studies are restricted to one-and two-pure Ni overlayers on Fe(001), the inter-mixing of Ni-Fe at the interface is confirmed by experiments.The effects of magnetism on stability and alloy formation of the overlayer were under experimental and theoretical investigations [7][8][9][10][11]. These studies have included non-magnetic (Ag, Cu) overlayers on a magnetic (Fe) substrate. They concluded that coordination and magnetic structure have the main contributions to stability of the alloyed overlayer systems. The structural (magnetic) part stabilizes the system by increasing (decreasing) the coordination number.In this study we report an analysis for total energy and magnetic structure of Ni/Fe(001) systems in different combinations, which includes Ni overlayer, Ni interlayer diffusion, and Ni-Fe alloy formations for one and two MLs on Fe(001). In order to identify the equilibrium configuration of Ni overlayer on Fe substrate; we have examined the formation energy gain by altering the order, the number of Ni atoms, and the number of Ni layers. The stability of the surface alloy formation is examined using a convention of energy calculation reported elsewhere [7,8].