The composite-type alloying method was modified for Cr containing steel powders to improve the compressibility and tensile strength of the sintered compacts. This new method includes prealloying of elements of low solution hardening such as Cr, and the subsequent addition of other elements such as Mo of lower affinity with oxygen than that of Cr as fine particles by bonding to the surface of the prealloyed particles. The modified composite-type alloyed steel powder containing 1.0% Cr and 1.0% Mo attained a green density of 7.18 Mg/m3 when compacted at 686 MPa. This value is higher by 0.10 Mg/m3 than that of a conventional Cr prealloyed powder. The tensile strength of the sintered and heat-treated compacts was improved to 1420 MPa from 1260 MPa of the conventional material, when a compact with the addition of 0.6% graphite powder was sintered at 1523 K with subsequent bright-quenching and tempering. This strengthening is attributed to the high compressibility, and low oxygen content of the powder, and to the use of transient liquid-phase sintering. The tensile strength, absorbed energy, and fatigue strength of sintered, carburized, and tempered compacts were superior to those values of the compacts made from the conventional prealloyed powder. The wear resistance of the sintered, carburized, and tempered compacts was equal to that of the conventional Cr containing material, and 100-times superior to that of Ni containing composite alloyed powder. These improved properties of the carburized and tempered compacts are attributed to the high sintered density resulting from high compressibility, and to the low amount of the retained austenite.