The effect of Ni and Co metal microparticles (MPs) and nanoparticles (NPs) on the structural and mechanical properties of Fe + 0.5 % C steel powder alloy was analyzed. The results revealed that the modification of the alloy by (Ni, Co) NPs can lead to the formation of a fine-grained compact and less porous structure, hence, significantly improve the mechanical properties of the sintered material. MPs modified samples were found to be highly porous when compared to the control. The introduction of 0.5 wt.% Co NPs increased the hardness value of the alloy to 58 HRB, whereas 0.5 wt.% Co MPs reduced the hardness to 47 HRB. The most beneficial effect is observed with 0.5 wt.% Ni NPs addition, wherein the hardness value increased to 63 HRB when compared to 52 HRB of the control sample. The highest flexural strength of 313 MPa was observed for Ni NPs incorporated alloy, whereas the least flexural strength of 156 MPa was noticed for the alloy containing 0.5 wt.% Co MPs. The fracture study confirmed that (Ni, Co) NPs increased the degree of densification, whereas Co MPs additives lead to the formation of large pits and cracks, consequently, to the destruction of material by a brittle inter-granular mechanism. Thus, this study introduces the use of Ni and Co NPs as modifiers in Fe + 0.5 % C alloy via powder metallurgy.