This paper describes a method for the preparation of (125)I sources for their use in bone densitometer. The process consists of preparation of silver pellets of size ∼2.5 mm (ϕ) × 0.6 mm (l) by 'Cold die compaction technique', palladium coating of the silver pellets, adsorption of (125)I on the palladium coated silver pellets and encapsulation source matrix in a titanium capsule [ 3 mm (ϕ) × 10 mm(l)] using Nd:YAG laser. The texture and morphology of the source matrix were examined by SEM and EDS analyses. Encapsulated sources containing (125)I activity up to ∼1.85 GBq (50 mCi) were prepared. Quality control tests that were necessary before application were performed and gave satisfactory results.