Nanoparticles of iron carbide wrapped in multilayered graphitic sheets were synthesized by a newly developed method in which an electric plasma was flashed in an ultrasonic cavitation field in liquid ethanol. The size of the carbon nanocapsules ranged between 5 and 600 nm. The crystal structures of the spherical cores were found to be orthorhombic Fe3C and monoclinic X-Fe2.5C. Some spherical particle cores were also discovered in the amorphous state. The magnetic hysteresis loop of the synthesized powder at room temperature showed a saturation magnetization of 51.36 A m(2) kg(-1) and coercivity of 3.4 kA m(-1). (c) 2005 Elsevier B.V. All rights reserved.