Nanoparticles of ɛ-Fe2.8Cr0.2N system exhibit the exchange bias phenomenon due to the exchange coupling of the spins of the antiferromagnetic (AF) oxide/oxynitride surface layer and the ferromagnetic (FM) nitride core. Exchange bias is observed at 10 K both in the absence and presence of cooling field. Due to the interface disorder, a mixture of parallel and anti-parallel/perpendicular coupling of the AF and FM spins is observed. The roughness of AF-FM interface induces disorder due to the random exchange anisotropy. The saturation magnetization is also found to be drastically lowered as compared to parent ɛ-Fe3N. Below 58 K, the broad peak (T E ≅ T f ) in zero-field cooled (ZFC) magnetization curves indicates the presence of unidirectional anisotropy and spinglass-like ordering, that arises from the freezing of localized frustrated spins.