In this paper, the phase formation process of Mn2.5Ge samples, prepared by mechanical alloying of Mn and Ge metal powders and annealing, has been studied. Results showed that in the milled samples the stable phase is Mn11Ge8 compound with orthorhombic structure and Pnam space group. The value of saturation magnetization increases by increasing milling time from 0.2 up to 1.95 (Am2Kg-1). The remanece of the samples increases by increasing the milling time while the coercivity decreases. Annealing of 15-hour milled sample results in disappearance of Mn and Ge and the formation of new phases of Mn3Ge, Mn5Ge2, Mn5Ge3 and Mn2.3Ge. Mn3Ge is the main phase with Do22 tetragonal structure and I4/mmm space group which is stable and dominant. The enhancement of saturation magnetization in the annealed sample is related to the formation of three new magnetic phases and the increase of coercivity is due to the presence of Mn3Ge compound with tetragonal structure. Studies were replicated on samples made by arc melting method to compare the results and to investigate the effect of the preparation method on phase formation and structural and magnetic properties of the materials. In these samples the saturation value was in range of 0.2 up to 1.95 (Am2Kg-1) depending on preparation methods. Rietveld refinement shows that Mn2.3Ge sample prepared from arc melted under 620oC anealing is single phase. Magnetic analysis of this sample show a saturation magnetization of 5.252(Am2Kg-1) and 0.005 T coercive field.