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In this paper, we report on the production of Fe cluster/FePt matrix nanocomposite permanent magnets. Monodispersed Fe clusters with sizes below 10 nm were formed by gas aggregation techniques. These Fe clusters were imbedded in an FePt matrix by alternate deposition from two sources. Specimens with a range of Fe cluster phase content from 0 to 30 vol% were produced by controlling deposition times from each source. As-deposited FePt formed in the A1 structure; thus, post-deposition heat treatment was necessary to form the hard magnetic L10 FePt compound. A single-step heat treatment at 600 °C for 10 min leads to nanocomposite structures with excellent magnetic properties. The coercivity decreased with increasing Fe cluster content, while the energy product initially increased, reaching a maximum of almost 18 MGOe, and then decreased at higher Fe cluster content. Secondary heat treatment at 500 °C signifi cantly improved the magnetic properties when compared with the single-step heat treatment at 600 °C. Increased coercivity and remanence was observed, resulting in energy products of 21 MGOe. The energy products are close to 70 percent greater than expected for uncoupled systems.