An apparatus and process for forming compacted powder metal parts having a non-axial undercut feature. An undercut die is located between the upper and the lower dies and contains a plurality of shaped punches aligned in a circular pattern. Each of the shaped punches contains a working edge. The working edges converge to form an inner circumference which creates the undercut feature. The edges of the shaped punches slide with respect to each other to change the size of the inner circumference from a maximum diameter position to a minimum diameter position. During compaction, the rotation of the shaped punches alters the inner circumference to its minimum diameter position thereby forming an undercut in the final compacted part. The retraction of the shaped punches to its maximum diameter position enables the unimpeded removal of the part from the tool set.