To determine the effect of various heat treatments on the microstructure and dry sliding wear behaviour of iron based powder metallurgy (PM) steels, atomized iron powder was mixed with 0.3% graphite + 2% Ni. The mixed powders were cold pressed at 700 MPa and sintered at 1200 °C for 30 min under pure Ar gas atmosphere. One of the sintered specimens was quenched from 890 °C and then tempered at 200 °C for 1 h. The other sintered specimens were annealed at different intercritical heat treatment temperatures of 728 and 790 °C and water quenched. Through this intercritical annealing heat treatment, the specimens with various ferrite + martensite volume fractions were produced. Wear tests were carried out on the quenched + tempered and intercritically annealed specimens under dry sliding conditions using a pin-on-disk type machine at constant load and speed and the results were compared in terms of microstructure, hardness and wear strength. It was seen that hardness and wear strength in intercritically annealed specimens were higher than that of quenched + tempered specimen. © 2006 Elsevier Ltd. All rights reserved.