Iowa State University and Ames Laboratory researchers have demonstrated enhanced toughness and improved magnetic performance by producing novel tough REPMs with heterogeneous structures, such as bi-modal, tri-modal, multi-modal or gradient grained structures, or other microstructural heterogeneity. This invention not only improves the magnet manufacturing efficiency and machinability, it reduces part failure rate, and effectively uses expensive critical materials. It also greatly expands the market for this class of permanent magnets. Tougher and fracture resistant magnets offer opportunities for new applications, new shapes, and lower costs. Tougher REPMs also make it possible for production of bulky magnets with even higher magnetic performance and larger dimensions via optimization of alloy composition and heat treatment process.