A superfine multi-component iron-based catalyst powder with less oxide impurities was prepared by water-gas combined atomization technique. By controlling the type and content of the oxide impurities in the catalyst, the stability of the metallic film at diamond growth interface could be well controlled, improving the quality and self-sharpness of diamond. Furthermore, two-dimensional layered growth of diamond was improved under the stable thermodynamic and kinetic conditions by adjusting the synthesis process, improving the self-sharpening ability of step-like micro-fragmentation of diamond. The synthetic quality and crystal growth characteristics of diamond produced by conventional FeNi30 and newly designed catalyst were analyzed and compared by means of optical microscopy, scanning electron microscopy (SEM) and energy dispersive spectroscope (EDS). The results show that the self-sharpness of the diamond produced by new catalyst is well improved, the sharpness of the cement diamond saw blade and wire saw prepared by the as-produced diamond is more than 15% higher than before, and the continuous working stability of the tools is remarkably improved.