Abstract Permanent magnets based on neodymium‐iron‐boron (Nd‐Fe‐B) alloys provide the highest performance and energy density, finding usage in many high‐tech applications. Their magnetic performance relies on the intrinsic properties of the hard‐magnetic Nd 2 Fe 14 B phase combined with control over the microstructure during production. In this study, a novel magnetic hardening mechanism is described in such materials based on a solid‐state phase transformation. Using modified Nd‐Fe‐B alloys of the type Nd 16 Fe bal‐x‐y‐z Co x Mo y Cu z B 7 for the first time it is revealed how the microstructural transformation from the metastable Nd 2 Fe 17 B x phase to the hard‐magnetic Nd 2 Fe 14 B phase can be thermally controlled, leading to an astonishing increase in coercivity from ≈200 kAm −1 to almost 700 kAm −1 . Furthermore, after thermally treating a quenched sample of Nd 16 Fe 56 Co 20 Mo 2 Cu 2 B 7 , the presence of Mo leads to the formation of fine FeMo 2 B 2 precipitates, in the range from micrometers down to a few nanometers. These precipitates are responsible for the refinement of the Nd 2 Fe 14 B grains and so for the high coercivity. This mechanism can be incorporated into existing manufacturing processes and can prove to be applicable to novel fabrication routes for Nd‐Fe‐B magnets, such as additive manufacturing.