The response of Ni-SiC powders deposited by Gas Dynamic Spraying (GDS) with various particle velocities, and their compaction behavior to the different packing densities were studied in parallel. Bulk compacts (90–99% dense), made in the form of 6 mm diameter by 3 mm thick disks, were analyzed to determine the structural changes occurring within the particles and at the particle boundaries, and to examine their mechanical properties. Optical microscopy and SEM observations revealed the presence of a lamellar morphology and a strong interparticle bonding in the composite coating. An analysis of the experimental data revealed the retention of the nanoscale structure and a localized grain refinement. Adiabatic shear band areas were observed and thought to be responsible for the grain refinement. Powder layers, which were shear compacted to the packing density (up to 90% dense), showed the best densification characteristics. Correspondingly, coatings with enhanced mechanical properties and a strong exchange coupling between hard and soft phases are obtained.