The rapidly growing applications of nanomagnets require acid/base stable, oxidation-resistant shells with chemically controlled surface structure. An ideal core should be metallic and highly magnetic. We demonstrate the production of iron-based nanoparticles, ranging from iron oxide to iron and iron carbide, by systematically modifying the degree of reduction during flame spray synthesis under a controlled atmosphere. At a laboratory scale, continuous production yields iron-based particles of 20−50 nm at a production rate of >10 g h−1. Carbon-encapsulated iron carbide (C/Fe3C) combines exceptionally high saturation magnetization (140 emu g−1), air stability (up to 200 °C), and resistance against acidic dissolution (1 week in 24% HCl). The top graphene-like carbon layer could be covalently functionalized with various linkers, thus allowing us to chemically design the particle surface. Activity was demonstrated by reacting 2-phenyl ethyl amine functionalized nanomagnets with carboxylic acid chlorides as a model reaction. The present nanomagnets consist of biologically well-accepted constituents. They combine the required chemical reliability, improved magnetization if compared to magnetite with the potential for technical scale manufacturing, and therefore open stable nanomagnets to a broad range of fascinating separation problems (extraction/water treatment) and biomedical research.