A method of producing an R--Fe--B-based, sintered permanent magnet, wherein R is at least one rare earth element including Y, having a small oxygen content. A coarse alloy powder prepared by a reductive diffusion method is milled and recovered into a solvent to form a slurry. The slurry is wet-compacted to form a green body which is then sintered after removing the solvent. The milling, recovering, wet-compacting, solvent-removing and sintering steps are carried out while preventing the powder, slurry and green body from being brought into contact with air to minimize the oxygen content in the final sintered permanent magnet. The sintered permanent magnet produced has a high density and a high magnetic properties due to a low oxygen content.