In this research a mixture of barium ferrite and graphite powders was milled in a planetary ball mill and then heat treated in vacuum to produce BaFe(12)O(19)/Fe(3)O(4) and Fe/Fe(3)O(4) magnetic nano-composites. The effects of milling time and heat treatment temperature on the characteristics of powder mixture were investigated by X-ray diffraction analysis, vibrating sample magnetometer, transmission electron microscopy and Mossbauer spectroscopy. Phase analysis results showed that Fe(2)O(3) in barium ferrite partially reduced to Fe(3)O(4) during milling; hence, the reduced phase and remaining barium ferrite formed a nano-composite of BaFe(12)O(19)/Fe(3)O(4) after 20 h of milling. Heat treatment of the 40 h milled samples at 750-900 degrees C resulted in formation of Fe containing nano-composite. Magnetic measurements indicated that the coercivity of 267.92 Oe for 40 h milled sample decreased to 22.57 Oe by heat treatment at 900 degrees C, while its saturation magnetization increased from 31.56 to 169.43 emu/g due to the formation of Fe nano-crystallites.