A study of the effect of non-magnetic particles on the magnetic properties of nickel is reported, The presence of inclusions is known to affect the structure sensitive magnetic properties of materials, In this work, two kinds of inclusions, namely, alumina particles and voids were studied and their effects on the magnetic properties were investigated. Powder metallurgy techniques were used to produce nickel compacts with varying amounts of alumina present. While coercivity increased with the volume of inclusions present, initial permeability decreased. Other properties such as remanence and hysteresis loss did not show a significant variation due to their sensitivity to the demagnetizing effects of the inclusions, An attempt has been made in this paper to explain quantitatively the variation in the magnetic properties in terms of the amount of inclusions present. Magnetic property measurements could be a useful non-destructive technique for determining porosity in magnetic materials.