Transition metal-based intermetallic materials are candidates for high-temperature structural applications. However, they are limited by their low fracture toughness at ambient temperature. Given Fe is a low-cost metal with a low environmental impact, it is necessary to design tough Fe-based intermetallic alloys. We report a novel ferrite-Fe ₂Mo intermetallic synthesized through arc melting and quenching of Fe _0.78Mo _0.22 alloy. Diffusional-displacive mixed-mode transformation of the parent ferrite phase resulted in the formation of nanocomposite microstructure. Two distinct microstructure morphologies of the product μ phase were observed: (i) allotriomorphic phase formation at the parent ferrite grain boundaries and (ii) formation of basket-weave Widmanstätten structures at the parent grain interior. Electron probe microanalysis (EPMA) revealed Mo partitioning across ∼800 nm wide Widmanstätten laths, establishing that it is a diffusional-displacive mixed-mode transformation. We performed atom probe tomography (APT) investigations to ascertain the nanoscale Mo solute partitioning. Based on the chemistry of the retained parent ferrite, the Mo partitioning temperature was estimated to be ∼865 °C. Mo partitioned Widmanstätten lath formation is clarified using a shear-assisted diffusional transformation model. APT studies further revealed that the composition of the product μ phase corresponds to stoichiometric Fe ₂Mo. It is an anomaly since stoichiometric Fe ₂Mo typically corresponds to λ C14 Laves phase. We explain the mechanism of μ phase formation with Fe ₂Mo stoichiometry. The nanocomposite exhibits a high hardness (HV ₂) of 7.54 GPa and excellent toughness (evidenced by resistance to indentation cracking).