Formation of nanocrystalline ferrite was investigated using milled powders obtained by planetary ball milling of chips, which were made by high speed mechanical cutting of a low carbon steel(0.15%C-1.1%Mn-0.01%Ti). After 4 hour milling the chips were changed to powders of $50{mu}m$ in average size, and with increasing milling time the powders were refined to about $3{mu}m$ for 128 hour and showed more equiaxed shapes. Nanocrystalline(nc) region appeared in the surfaces of powders milled for 1 hour, and the 4 hour milled powders were almost filled with nc region. Hardness of nc region was much higher than that of work-hardened(WH) region. With increasing milling time, ferrite and cementite in pearlite were severely deformed and lamellar spacing was decreased, and then cementites began to disappear after 4 hour milling due to dissolution into ferrite. Deformation bands formed in lightly work-hardened region showed large width and similar crystallographic orientations. Spacing of deformation bands was decreased with deformation and the layered microstructure consisting of narrow deformation bands subdivided into variously oriented small grains was formed by more deformation, and eventually this structure seemed to be evolved to the nc structure by further deformation. It is also conjectured the growth of nc ferrite grains occurred through the coalescence of nanocrystalline ferrites rather than the nucleation and growth of recrystallized grains.