In order to increase the surface hardness and improve the tribological properties of stainless steel, Fe-Al intermetallic compound layers were created by atmospheric-controlled induction-heating fine particle peening (AIH-FPP). The surface microstructure of the stainless steel treated with AIH-FPP was characterized by scanning electron microscopy, energy dispersive X-ray spectroscopy, X-ray diffraction, and micro-Vickers hardness testing. In addition, the tribological properties were investigated by reciprocating ball-on-disk wear tests. When high-speed steel particles coated with thin aluminum layers were used as the shot particles, Fe-Al intermetallic compound layers were formed at the surfaces of the stainless steel with increased heating time during AIH-FPP. This is because aluminum was transferred from the shot particles, and the temperature at the treated surface increased as a result of a combustion synthesis reaction. When the heating temperature after FPP was increased, the transferred aluminum and nitrogen in the atmosphere reacted, which resulted in the formation of aluminum nitrides in addition to Fe-Al intermetallic compounds. The tribological properties of the stainless steel were improved by AIH-FPP since high-hardness layers were created. The results indicate that the formation of an Fe-Al intermetallic compound layer with high hardness by AIH-FPP is effective for modifying the tribological properties of the stainless steel within a relatively short span of time.