Nanocrystalline zirconium diboride (ZrB2) powder was produced by mechanochemistry from the magnesiothermic reduction in the Mg/ZrO2/B2O3 system. The use of high-energy milling conditions was essential to induce a mechanically induced self-sustaining reaction (MSR) and significantly reduce the milling time required for complete conversion. Under these conditions, it was found that the ignition time for ZrB2 formation was only about a few minutes. In this study, the mechanism for the formation of ZrB2 in this system was determined by studying the relevant sub-reactions, the effect of stoichiometry, and the thermal behavior of the system.