The paper deals with the analysis of microstructure formation in the tool steel of ledeburite type Ch12MF4 with the chemical composition of 2.37% C, 12.06% Cr, 1.2% Mo and 4.0 % V [wt. (%)] in the process of nitrogen gas atomization. Three main types of solidification microstructures were observed in rapidly solidified powder particles: dendritic, compound and cellular. Based on the morphological features of microstructures observed in rapidly solidified particles and mathematical modeling of the thermal history of solidifying spherical droplets, the semi-quantitative model of the microstructure development in the Ch12MF4 steel during atomization was suggested. According to this model, it is supposed that the transition from dendritic to partially dendritic (compound) and nondendritic microstructures results from the thermally induced fragmentation of dendrites by the mechanism of their remelting, morphological changes of dendrite fragments and following spheroidization. The intensity of dendrite fragmentation in solidifying particles of different diameters is controlled mainly by the recalescence temperature and duration of quasi-isothermal period of solidification.