Carbon-coated cobalt nanocrystals were prepared by a modified method of are discharge under a He gas blow around a graphite rod cathode. The morphology and structure of the carbon coating and the cobalt enclosure were examined by high-resolution transmission electron microscopy, Raman scattering, and X-ray diffraction. The magnetic properties of these particles after acid treatment were measured with a vibrating sample magnetometer and a thermogrametric analyzer in a magnetic field gradient. Typical sizes of these particles were 20-40 nm depending on the discharge conditions. Large shifts of Raman peaks were observed upon acid treatment, reflecting the structural change of the carbon shell induced by the acid treatment. The blocking temperature of the sample was estimated to be 373 degrees C.