High resolution neutron diffraction was applied for elucidating of the microstructural evolution of nanocrystalline niobium carbide NbC0.93 powders subjected to high-energy ball milling. The diffraction patterns were collected with the high resolution Fourier diffractometer HRFD by using the reverse time-of-flight (RTOF) mode of data acquisition. The traditional single diffraction line analysis, the Rietveld method and more advanced Whole Powder Pattern Modeling technique were applied for the data analysis. The comparison of these techniques was performed. It is established that short-time milling produces a non-uniform powder, in which two distinct fractions with differing microstructure can be identified. Part of the material is in fact milled efficiently, with a reduction in grain size, an increase in the quantity of defects, and a corresponding tendency to decarburize reaching a composition NbC0.80 after 15 h of milling. The rest of the powder is less efficiently processed and preserves its composition and lower defect content. Larger milling times should have homogenized the system by increasing the efficiently milled fraction, but the material is unable to reach a uniform and homogeneous state. It is definitely shown that RTOF neutron diffraction patterns can provide the very accurate data for microstructure analysis of nanocrystalline powders.