Highly supersaturated solid solutions of nitrogen in ferrite (bcc) were produced by ball milling of various powder mixtures of &-iron and (-Fe 3 N 1.08. The microstructure and the crystal structure of the product phases were examined as function of nitrogen content using X-ray powder diffraction, high-resolution electron microscopy and Mössbauer spectroscopy. It was found that the grain size decreases with increasing nitrogen content. Unexpected shifts of the reflections in the X-ray powder diffraction patterns of the supersaturated N-ferrites, depending on the hkl values of the reflections and nitrogen content, were observed. It could be shown that these shifts cannot be explained by tetragonal distortion of the bcc-unit cell, but they are in accordance with the occurrence of a certain type of stacking faults on bcc-{211} planes. This result, together with the observation of some isolated fcc crystals (by high-resolution electron microscopy) and a drop in microstrain for high nitrogen contents, demonstrates that unconventional deformation mechanisms are operative in these materials below a certain grain size, leading to a breakdown of the classical Hall-Petch relation for mechanical strengthening.