A carbon–iron thin film, composition 46 at. % Fe and thickness 26 nm, was synthesized by ion-beam sputtering with a substrate temperature of 573 K. The microstructure of the film was characterized by transmission electron microscopy and small-angle x-ray scattering under grazing incidence. It consisted of iron-rich particles, with an average in-plane diameter of 3.2 nm, uniformly dispersed in a graphite-like carbon matrix. These particles were elongated along the in-depth direction, that of the thin-film growth. After annealing at 623 K for 1 h, no modification in the microstructure of the film was observed. The present study shows that the co-sputtering of graphite and iron performed at low temperature in comparison with the conventional arc discharge method, is a useful synthesis method to obtain thin films of encapsulated nanoparticles which have a good thermal stability. © 1999 American Institute of Physics.