The structure and magnetic properties of mechanically alloyed and heat treated xFe.(1-x)Fe2O3 powders have been investigated. As-milled powders had a nanocrystalline structure with a particle size of 5-10 nm and consisted of Fe2O3 and Fe3O4 for x less than or equal to 0.2, Fe3O4 and FeO for x=0.2-0.5 and FeO and Fe for x greater than or equal to 5.0. Nanocrystalline metastable FeO decomposed into nanocrystalline Fe3O4 and Fe after annealing at 250-400 degrees C and reformed again to submicron FeO after annealing at temperatures above 550 degrees C. Nanocomposites of Fe3O4/Fe obtained by decomposition after annealing at similar to 300 degrees C exhibited high values of magnetisation and coercivity. (C) 1998 Elsevier Science S.A.