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Developing texture in nanocrystalline permanent magnet alloys is of significant importance. Directional annealing is shown to produce texture in the permanent magnet alloy (Sm12Co88)99Nb1. Melt spinning produced isotropic grain structures of the hard magnetic metastable SmCo7 phase, with grain sizes of ∼300 nm. Conventional annealing of melt-spun (Sm12Co88)99Nb1 alloy produced Sm2Co17 phase with random crystallographic orientation. Directional annealing of melt-spun (Sm12Co88)99Nb1 alloy, with appropriate combinations of annealing temperature and translational velocity, produced Sm2Co17 phase with (0 0 0 6) in-plane texture, as determined by x-ray diffraction analysis and magnetic measurements. The magnetization results show out-of-plane remanence higher than the in-plane remanence resulting in the degree of ‘magnetic’ texture in the order of 25–40%. Coercivity values above 2 kOe were maintained. The texture development via directional annealing while minimizing exposure to elevated temperatures provides a new route to anisotropic high-energy permanent magnets.