The structure and magnetic properties of mechanically milled Nd7Dy1Fe78Co10B4 have been studied. As-milled samples consist of a mixture of an amorphous phase and a b.c.c. FeCo phase and exhibit soft magnetic behaviour. Optimally annealed samples contain a nanocrystalline mixture of (NdDy)(2)(FeCo)(14)B and b.c.c. FeCo with an average grain size of 20 nm. Enhanced remanence values of up to 120 emu g(-1) and coercivity of 5.3 kOe are obtained in isotropic nanocomposite samples containing similar to 40vol.% of soft phase. The magnetic behaviour is associated with exchange coupling between the hard and soft magnetic phases. (C) 1997 Elsevier Science Ltd.