Nanostructure Forsterite powder was prepared by Sol-gel method and its microstructure was studied at a number of annealing temperatures using Rietveld structure and microstructure refinements. It was found that Sol-gel method used in this experiment does not produce pure Mg₂SiO₄ nanopowder. Instead the product is a mixture of Mg₂SiO₄ and MgO phases with approximate weight fractions of 75% and 25%, respectively. X-ray diffraction line broadening analysis revealed the crystallite shape is nearly spherical with the volume weighted average size of 20 – 50 nm in the annealing temperature range of 800 – 1100 °C. More investigations considering anisotropic line broadening confirmed the crystallite size and lattice strain are hkl dependent, but the anisotropy of strain is more pronounced.