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Gas-atomized Fe-4, 6wt.%Al powders were annealed in a damp hydrogen atmosphere with a dew point of 0°C and -17°C in order to cover the powder surface with a high electrical resistivity layer of Al2O3 and then compressed into cores. The powders should be oxidized at a temperature higher than 800 °C in order to oxidize the aluminum alone on the surface of powder, as confirmed by simulation using the STANJAN program. An Al-rich layer, i.e., an Al2O3 layer, was formed on the surface of the Fe-Al powder, as confirmed by SEM. Loss of the cores made from the selectively oxidized powders was much lower than those of the cores with phosphate coats, so the selectively oxidized powder can be used to fabricate electrical actuators with high levels of performance.