Microstructure evolution during the formation of B2–NiAl by high energy ball milling of equiatomic elemental mixtures was studied by X-ray diffractometer, scanning electron microscopy, and transmission electron microscopy (TEM). The crystallite size, lattice defects and ordering of the B2–NiAl were monitored via TEM as function of milling time. The diffusion reaction, Ni+Al→NiAl3 or/and Ni2Al3, occurred during high energy ball milling, and to a certain extent offered the stored energy for the explosive exothermic reaction, Ni+Al→B2–NiAl. The fine microstructure of newly formed B2–NiAl after 5 h milling involved high density defects, e.g. antiphase boundary, long range ordering domains, vacancies, and dislocations.