The water atomization process is a standard and economical process for steel powder production. However, it faces challenges in attaining control of powder size distribution and especially in reducing oversized fraction. A CFD model was developed to understand the effects of water jet apex angle, and nozzle design on droplet dynamics, energy and momentum transfer, and particle size control. Various apex angles were tested and the energy and momentum transfer from the water jet to the metal stream was plotted. Several nozzle designs were conceptualized and tested through CFD simulations. The effect of the diameter of the metal stream was also evaluated. The present study aided in understanding the fundamentals and applying them to control the powder production process.