The first photocontrollable magnetic nanoparticles containing CdS and Prussian blue (PB) have been created using reverse micelles as nanoreactors. Photoinduced electron transfer from CdS to PB in the reverse micelle changed the magnetic properties of the composite nanoparticles from ferromagnetic to paramagnetic. The magnetization in the ferromagnetic region below 4 K was substantially decreased after UV light illumination and could be restored almost to its original level by thermal treatment at room temperature. This novel strategy of designing composite nanoparticles containing photoconductive semiconductors and magnetic materials to create photoswitchable magnetic materials may open many possibilities in the development of magneto-optical devices.