We report silicon nanoparticles with a particle size distribution of similar to 80 nm (mode) through controlled impact mode cryomilling of semiconductor grade silicon wafers at a temperature of 200 K under argon atmosphere. The transmission microscopic characterization of these particles establishes a partial transformation of the crystalline silicon into an amorphous phase yielding a two-phase microstructure for each of the particles. A high-speed imaging technique is utilized to understand the effect of impact energy (and milling intensity) on the phase transformation during milling. In a further development, etching of the two-phase nanocomposites leads to the dissolution of the amorphous phase yielding free nanoparticle of similar to 2 nm size that exhibit UV range photoluminescence with potential for sensors and other optical applications.