Room-temperature ferromagnetism was found in BaTi0.98Mn0.02O3 nanoparticles fabricated by solid-state reaction and mechanical-ball milling. The nature of ferromagnetism was systematically investigated by means of X-ray diffraction (XRD), electron spin resonance (ESR), superconducting quantum interference device (SQUID), and X-ray absorption (XAS). A weak ferromagnetism was found in the defect-rich samples with the milling time (t(m)) longer than 6 hrs (i.e., t(m) > 6 hrs), while defect-poor ones with t(m) = 0-6 hrs exhibited mainly the paramagnetic properties. Detailed analyses of ESR and XAFS data indicated the shift in the oxidation state of Mn from 4+ to 3+ after milling, and both Mn3+ and Mn4+ were incorporated into the Ti sites of the BaTiO3-tetragonal host lattice. With the results obtained, we believe that exchange interactions due to Mn(4+)-Mn4+ and/or Mn(3+)-Mn3+ dipole pairs are responsible for broad ESR signals in the Lorentzian shape and the paramagnetic behaviors of the samples. Meanwhile, the weak ferromagnetic interaction is generated from various point defects such as Ti-site cation vacancies or Ti(3+)-Ti3+ super-exchange interaction pairs.