We report the formation of Ag-Fe nanoparticles with an ultrafine scale phase separated microstructure consisting of Ag and Fe3O4 phases. Ag-Fe particles were synthesised by the co-reduction of Ag and Fe salts in water medium. The co-existing Ag and Fe3O4 phase volumes were around similar to 1 nm in one of the dimensions. (C) 2011 Elsevier B. V. All rights reserved.