Fe(C) and Ni(C) nanocapsules with low carbon content have been produced via an arc discharge process in ethanol vapor. It is clarified by X-ray diffraction that the core of the Fe(C) nanocapsules consists of γ-Fe, α-Fe and Fe₃C phase, while that of the Ni(C) nanocapsules contains only nickel. High-resolution transmission electron microscopy imaging confirms that these particles have a broad size distribution and the core/shell structure. Besides mutually independent nanocapsules with segregate graphitic shells, those with sharing shells are also observed in the Fe(C) nanocapsules. The remanence and the coercivity at room temperature of both the nanocapsules are higher than those of the corresponding microcrystallines, while the saturation magnetization is lower.