This study systematically investigates the effect of particle size distribution in FeSiBC amorphous flake powders prepared by mechanically crushing melt-spun ribbons on the magnetic performance of soft magnetic composites (SMCs). The crushing process was found to damage the ribbon integrity, making the powder less likely to saturate under an applied magnetic field and deteriorated soft magnetic performance. Annealing treatment effectively alleviated the residual stress induced during crushing, resulting in an approximately 25.8% reduction in coercivity and a 7% increase in saturation magnetization. The flake powders were classified into five groups by mesh size: − 120 mesh, 120–200 mesh, 200–250 mesh, 250–300 mesh, and − 300 mesh, and were compacted into corresponding SMCs. With decreasing particle size, the aspect ratio of the flakes decreased and particle alignment during pressing became more disordered, which enhanced the internal demagnetizing field effect. Consequently, both the density and the effective permeability (μe) of the composites declined from 5.77 and 65.09 to 5.60 g/cm3 and 52.27, respectively. Loss separation analysis indicated that finer flakes are effective in suppressing eddy current losses at high frequency, yet excessively small particle sizes introduce higher specific surface area and more structural defects, which aggravate hysteresis loss. Among all size groups, the flakes within the 250–300 mesh range demonstrated the most balanced magnetic performance, achieving an effective permeability of 56.09 at 100 kHz, a DC bias performance of 77.88% under 100 Oe, and a low power loss of 150.70 mW/cm3 at 100 kHz and 50 mT. These results reveal the synergistic effect of particle size, flake morphology, and stress relief on magnetic loss behavior, and provide valuable guidance for the development of low-loss, high-frequency, and highly reliable soft magnetic materials.