The influence of Fe addition on thermal stability, crystallography, and magnetic properties of τ-Mn51Al47C2 was investigated. Alloys with composition Mn51-xFexAl47C2 (x = 0, 0.5, 1, 2, and 4) were synthesized by mechanical alloying method. High purity of τ-Mn(Fe)AlC up to 98% could be obtained after 10 h of milling, then annealed at 1050 °C for 1 h, and followed by an aging process at appropriate temperatures from 515 to 540 °C for 50 min. It was found that the thermal stability of both ε and τ phases was enhanced by the addition of Fe up to 4 at.% into MnAlC alloy through a shifting of ε-to-τ transformation temperature to high temperature region and a reduction in c/a ratio of Fe doped τ-MnAlC compared to iron free τ-MnAlC. While the magnetization and Curie temperature of Fe doped τ-MnAlC showed a reduction compared to iron free τ-Mn51Al47C2, coercivity seems not to be significantly affected. Ab initio calculation showed a lower magnetic moment of Fe (μFe = 1.77 μB) compared to Mn (μMn_average = 2.36 μB) in τ-Mn(Fe)AlC when Fe substituted Mn position at 1a site.