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In this paper, we investigate the magnetization reversal in single-phase RE2Fe14B and two-phase α-Fe/RE2Fe14B with varying nanoscale grain structures and intergranular exchange interactions produced via controlled segregation during crystallization. We show that the loss of coercivity arises because domain-wall processes dominate the magnetic reversal as the exchange interactions increase. Micromagnetic modeling corroborates a transition to strongly cooperative magnetic reversal as the exchange interactions increase. The magnetic reversal is controlled by the growth of interaction domains via discrete domain-wall motion, and the coercivity is intrinsically limited by the presence of interaction domains. To alleviate this problem, we have built an additional length scale into the structure that is below the interaction domain size but above the limit for intergranular exchange interactions to be significant. These "single-interaction domain" structures retain nucleation-type magnetic reversal and high coercivity. We show experimentally that nanocomposite Sm-Co/Co with this additional length scale has excellent coercivity and nucleation-controlled reversal.