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BN-Fe nanocomposite films have been produced by dual ion-beam sputtering codeposition. The effect of using a reactive nitrogen assistance beam during the elaboration process has been studied by transmission electron microscopy, selected area electron diffraction, grazing incidence small-angle x-ray scattering, and magnetic measurements. Experimental results show that without assistance, we produce nearly spherical Fe(B) nanoparticles (2-3 nm in diameter) exhibiting a superparamagnetic behavior. When growing under assistance, we obtain vertically elongated nanoparticles of paramagnetic Ζ-Fe[sub 2]N encapsulated in disordered hexagonal BN. This study demonstrates the possibility of producing encapsulated nanoparticles with high shape anisotropy by activating the surface diffusion of the incoming deposited species. [ABSTRACT FROM AUTHOR]