Normally, immiscible Cu-Fe system was mechanically alloyed directly from blended powders (high oxygen content) and vacuum arc-melted bulk (low oxygen content) respectively which contain different levels of content of oxygen impurity, with a series of compositions (100–x) at.%Cu - x at.%Fe (x = 0, 5, 15, 25, 35), by means of high pressure torsion. All investigated compositions were deformed reaching single face-centered cubic supersaturated solid solutions after extremely deformation. It is found that not only Fe content increment can achieve a linear increase of lattice parameters for the solid solutions, but also for each specific composition with the same Fe concentration, lattices expand for the powder-deformed samples compared to bulk-deformed samples. This implies that interstitial oxygen atoms facilitate the lattice expansion of supersaturated nanocrystalline alloys. The theoretical calculation also confirms the lattice expansion effect caused by oxygen atoms. However, the grain size shows a contrary trend against lattice parameters, while Fe can significantly refine the grains, i. e., higher Fe concentration gets finer grains, oxygen has a much larger effect on grain refinement. Powder-deformed sample has an obvious smaller grain size as compared to the same composition sample deformed from arc-melted bulk, which induces large differences in mechanical properties between powder- and bulk-deformed samples. Our work systematically investigated the oxygen contamination in powder-processing technique implemented on nanocrystalline alloys, which may be substantially helpful for the future alloy designing and manufacturing.