Fe0.65Co0.35-MgAl2O4 and Fe0.65Ni0.35-MgAl2O4 nanocomposite powders are prepared by selective hydrogen reduction of monophasic oxide solid solutions synthesized by combustion in urea. The alloy particles, which are dispersed in the spinel matrix, are about 10 nm in size. An increase in reduction temperature from 700 to 1000 °C produces a narrowing of the particles’ composition range and an average composition closer to the target one. The magnetic nature of the alloy nanoparticles is discussed. The nanoparticles dispersed inside the oxide grains, which account for more than two thirds of the total metallic phase, are stable in air up to ca. 800 °C.