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The magnetic Fe–6.5 wt% Si powder was produced by gas atomization and its microstructure was also investigated. The secondary dendritic arm spacing (SDAS) is related to the droplet size, λ = 0.29 · D⁰·⁵, and the numerical solidification model was applied to the system, giving rise to the correlation of microstructure to the solidification process of the droplet. It is found that the solid fraction at the end of recalescence is strongly dependent on the undercooling achieved before nucleation; the chances for the smaller droplets to form the grain-refined microstructures are less than the larger ones. Furthermore, the SDAS is strongly influenced by the cooling rate of post-recalescence solidification, and the relationship can be expressed as follows, λ = 74.2 · (T)⁻⁰·³⁴⁷. Then, the growth of the SDAS is driven by the solute diffusion of the interdendritic liquids, leading to a coarsening phenomenon, shown in a cubic root law of local solidification time, λ = 10.73 · (tf)⁰·²⁹⁶.