Abstract: A powder metal steel alloy composition for high wear and temperature applications is made by water atomizing a molten steel alloy composition containing C in an amount of at least 3.0 wt %; at least one carbide-forming alloy element selected from the group consisting of: Cr, V, Mo or W; an O content less than about 0.5 wt %, and the balance comprising essentially Fe apart from incidental impurities. The high carbon content reduces the solubility of oxygen in the melt and thus lowers the oxygen content to a level below which would cause the carbide-forming element(s) to oxidixe during water atomization. The alloy elements are thus not tied up as oxides and are available to rapidly and readily form carbides in a subsequent sintering stage. The carbon, present in excess, is also available for diffusing into one or more other admixed powders that may be added to the prealloyed powder during sintering to control microstructure and properties of the final part.