In rapid tooling using the direct laser deposition process and stainless steel materials, only powders prepared using the gas-atomization method have been used because of their presumed superior flow characteristics. In this article, the use of water-atomized powder is investigated by comparing the behavior of the two types of 316 L powders, deposited using a CO2 laser and coaxial head. Results show little difference in the pneumatic conveyance of the powders, but considerably greater absorption of laser energy by the water-atomized powder between the nozzle and material deposition point. Walls produced using the water-atomized powder exhibited a more textured microstructure and smoother sidewall surfaces, with less surface metallic oxides, but the deposition rate was considerably lower than when using gas-atomized powder. (C) 2003 Laser Institute of America.