Powder materials are a class of industrial materials with many important applications. In some circumstances, surface modification and functionalization of these materials are essential for achieving or enhancing their expected performances. However, effective and precise surface modification of powder materials remains a challenge due to a series of problems such as high surface area, diffusion limitation, and particle agglomeration. Atomic layer deposition (ALD) is a cutting-edge thin film coating technology traditionally used in the semiconductor industry. ALD enables layer by layer thin film growth by alternating saturated surface reactions between the gaseous precursors and the substrate. The self-limiting nature of ALD surface reaction offers angstrom level thickness control as well as exceptional film conformality on complex structures. With these advantages, ALD has become a powerful tool to effectively fabricate powder materials for applications in many areas other than microelectronics. This review focuses on the unique capability of ALD in surface engineering of powder materials, including recent advances in the design of ALD reactors for powder fabrication, and applications of ALD in areas such as stabilization of particles, catalysts, energetic materials, batteries, wave absorbing materials and medicine. We intend to show the versatility and efficacy of ALD in fabricating various kinds of powder materials, and help the readers gain insights into the principles, methods, and unique effects of powder fabrication by ALD.