An isotropic permanent magnet is made by mixing a thermally responsive, low viscosity binder and atomized rare earth-transition metal (e.g., iron) alloy powder having a carbon-bearing (e.g., graphite) layer thereon that facilitates wetting and bonding of the powder particles by the binder. Prior to mixing with the binder, the atomized alloy powder may be sized or classified to provide a particular particle size fraction having a grain size within a given relatively narrow range. A selected particle size fraction is mixed with the binder and the mixture is molded to a desired complex magnet shape. A molded isotropic permanent magnet is thereby formed. A sintered isotropic permanent magnet can be formed by removing the binder from the molded mixture and thereafter sintering to full density.