This study focuses on the oxidation of water atomized metal powders. Pilot plant experiments were performed using liquid iron alloyed with manganese and carbon. The powder particle shape and the oxides were determined using optical and scanning electron microscopy with energy dispersive X-ray microanalysis. The oxygen in the atomized powders was mainly present as thin surface oxide layers, which were determined to increase from 10 to 40–60 nm, at increased particle sizes from 10 to 750 μm. In addition, manganese oxides were observed to be unevenly distributed at the surface of several particles for iron powders alloyed with 0.3 mass% Mn. Experimental data indicated that between 10 and 20% of the manganese was present as oxides in the powders. However, equilibrium calculations predicted a strong driving force for oxidation of manganese. More specifically, it was estimated that only 4% of the initial manganese content remained in the final atomized powders.