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The effect of different particle size distribution of Fe-6.5 wt%Si powder on the microstructure and soft magnetic properties of the corresponding soft magnetic powder cores (SMPCs) was investigated. By optimizing particle size distribution, the density of SMPCs increased and the total core loss significantly decreased. According to the result of loss separation, density of SMPCs is inversely proportional to hysteresis loss, while with increasing the content of the fine particles, the eddy current loss significantly decreased. It was found that with magnetic powder of particle size-grading as 10%, 10%, 60%, and 20% for particles with size between −75 to +38, −38 to +23, −23 to +13, and −13 μm, respectively, the Fe-6.5 wt%Si SMPCs exhibit optimal comprehensive magnetic performances with the effective permeability of about 60, the percent permeability at 100 Oe is up to 70%, and the lowest core loss of 553 mW/cm3. [ABSTRACT FROM AUTHOR]