Magnetic FeNi3 nanoparticles were synthesized in the internal structure of wood through an in situ fabrication approach. The morphology, crystalline phase and chemical composition of the FeNi3 modified wood was investigated by X-ray powder diffraction (XRD), Fourier transform infrared (FTIR) spectroscopy, scanning electron microscopy (SEM) with energy-dispersive X-ray (EDX) analysis and X-ray photoelectron spectroscopy (XPS). SEM confirmed that the magnetic nanoparticles were densely dispersed in the wood matrix. The magnetic hysteresis loops showed that the magnetism of composites is dependent on the amount of FeNi3 loading. The saturation magnetization of magnetic wood increases from 6.3 to 10.8 emu/g with an increase of FeNi3 loading from 12 to 18 wt %. Furthermore, magnetic wood showed significant directional dependence. The presented work will provide a feasible pathway for producing wood composite products.