A process based on the Kratschmer-Huffman carbon arc method of preparing fullerenes has been used to generate carbon-coated cobalt and cobalt carbide nanocrystallites. Magnetic nanocrystallites are extracted from the soot with a gradient field technique. For Co/C composites, structural characterization by x-ray diffraction and high-resolution transmission electron microscopy reveals the presence of a fcc Co phase, graphite, and a minority Co 2 C phase. The majority of Co nanocrystals exists as nominally spherical particles, 0.5–5 nm in radius. Hysteretic and temperature-dependent magnetic response, in randomly and magnetically aligned powder samples frozen in epoxy reveals fine-particle magnetism associated with monodomain Co particles. The magnetization exhibits a unique functional dependence on H/T, and hysteresis below a blocking temperature, T B≃ 160 K. Below T B, the temperature dependence of the coercivity is given by H c= H c i [1-(T/T B) 1/2], with H c i≃ 450 Oe.