Soft magnetic composites (SMCs) composed of ferromagnetic particles and insulating binder are highly desired in energy-saving and high-efficiency devices for their high electrical resistivity and softer saturation characteristics. However, traditional insulation coatings are facing thermal instability, inhomogeneous distribution, and magnetic dilution, presenting a major challenge for the trade-off relationship between power loss and permeability. Here, the phosphate-coated FeSiBCuNb/SiO2 SMC is successfully fabricated by a unique interdiffusion effect in hybrid interfacial layers, which shows a combination of ultralow power loss of 135.8 kW/m3 (50 kHz/100 mT), high effective permeability of 80.6, and good temperature stability. The interdiffusion behavior between Si/O and Fe/P/O elements promotes the formation of ultrathin, uniform, and multilayer interface structure, which alleviates the magnetic dilution. Penetrating oxidation at the edge interface and elements interdiffusion effect contribute to a higher electrical resistivity induced by hot isostatic pressing with rapid quenching, leading to a low eddy current loss. Synergistic effect of isostatic pressures and rapid quenching facilitates the formation of high-density Cu clusters corresponding to ultrafine microstructure, which is beneficial for low coercivity and low hysteresis loss. This study involves the interdiffusion mechanism of hybrid interfacial layers and nanocrystalline behavior, providing a new strategy for the next-generation of high-performance SMCs.