This paper reports the effects of annealing on the magnetic properties of ultrafine Nd-Fe-B powders with an average particle size of 0.67 µm. The powder was fabricated from hydrogenation–disproportionation–desorption–recombination (HDDR)-treated Nd-Fe-B alloys by hydrogen decrepitation and helium jet milling. The coercivity of the ultrafine powders was slightly increased by annealing below 500°C, and was drastically increased by annealing above 600°C. These two stepwise increases in coercivity were attributed to hydrogen desorption and formation of a liquid Nd-rich phase. In addition, after annealing below 500°C, the coercivity (μ₀H_c) of the ultrafine powder was higher than that of the conventional powder, which was prepared from a strip-cast Nd-Fe-B alloy power with a particle size of 1.12 µm, because of a decrease in particle size. In contrast, after annealing above 600°C, the μ₀H_c of the ultrafine powder was smaller than that of the conventional powder. The rare earth element content (Nd + Pr) was lower in the ultrafine powders than in the conventional powder. These results indicate that the rare earth element content was insufficient in the ultrafine powders.