In order to establish making process of water atomized iron powder for powder metallurgy, effect of heat treatment condition on change of powder properties and impurities was investigated at each tempeature of $850{sim}950^{circ}C$. The results are as follows. Particle morphology of iron powder changed slightly from sphercial type to irregular type and the amount of fine particle decreased more and more with increasing of heat treatment time at each temperature. The flow rate and apparent desity of iron powder also decreased due to particle coalescence in order of $850^{circ}C$, $950^{circ}C$, $900^{circ}C$. Those powder Properties became to decrease particularly at $900^{circ}C$ in alpha iron region. On the other hand, residual carbon and oxygen contents in iron powder decreased extremely with increasing of heat treatment temperature and time.