The present invention provides a two-step process for producing nuclear grade, active uranium dioxide (UO2) powder in which the first step comprises reacting uranium hexafluoride (UF6) with steam in a flame reactor to yield uranyl fluoride (UO2F2); and the second step comprises removing fluoride and reducing UO2F2 to uranium dioxide (UO2) in a kiln under a steam/hydrogen atmosphere. The two-step process, each step separated by a positive sealed valve means to prevent gas, particularly H2 flow back, tightly controls the exothermicity of the reaction, which allows for a very tight temperature control which controls the growth of the particles and results in UO2 powder that is active and of consistent morphology.