Demagnetization of porous green compacts consisting of iron‐alloy powder was observed under shock compression in the range of 4.0–13.5 GPa and 660–2040 K. The total reduction of the initial magnetization occurs under shock conditions with pressures exceeding 9 GPa and a temperature of 1300 K, and the possible mechanism for the observed demagnetization is consistent with the whole and/or partial &agr;‐ to &ggr;‐phase transition in the powder, depending on the localization of heat at the particle surfaces. The mechanism is also consistent with the anomalous low value of residual magnetic flux density of the recovered material which was overcompacted under undesirable conditions. ©1995 American Institute of Physics.