Magnetic nanocomposites composed of iron oxide and silver were fabricated by an inert gas condensation (IGC) method combined with co-evaporation, in situ oxidation, and in situ compaction techniques. The particle sizes of composite powder were controlled by varying helium gas pressure between 1 and 10 Torr, with the smallest one being about 10 nm at 1.0 Torr. The nanostructure of the composites was characterized by TEM. The magnetization behaviors were analyzed taking into account both the paramagnetic (PM) and ferromagnetic (FM) contributions to investigate the correlation between the nanostructure and the magnetic properties. It was found that some composites exhibit the superparamagnetism evidencing magnetically isolated grains as a single domain. TEM observation assisted with EDX revealed that iron nanocluster of a few nanometers size were surrounded by silver grains. Variation of the magnetic property of the nanocluster composites was also related to nanocluster size and heat treatment in an oxygen atmosphere.