Nickel–aluminum nitride films were prepared by reactive sputtering of a nickel aluminide plate in a nitrogen plasma. The initial product is a nanocomposite containing the nickel as the nitride, Ni3N, in aluminum nitride. Heating in vacuum to 500 °C causes selective decomposition of the thermally labile nickel nitride leaving the aluminum nitride unaffected. The nickel nanocomposite is of interest for potential applications as recording media, as are other finely divided dispersions of ferromagnetic metals in insulating matrices. The nickel–aluminum nitride nanocomposite shows a moderate coercive field of 35 Oe at 300 K and, in common with ultrafine particles of ferromagnetic materials, shows superparamagnetic behavior. The Ni3N/AlN nanocomposite was subjected to localized heating with the focused beam of an argon‐ion laser; this created features several microns in width that could be imaged with a magnetic force microscope, thus confirming its potential as a high density data storage medium. © 1995 American Institute of Physics.