Small Co particles were prepared by sputter etching of a 4-5 nm thick "island-like" Co film deposited on Si(111) substrate. The density of states (DOS) of the valence band was measured by means of ultraviolet photoemission (UPS) during the sputter etching to monitor the formation of small Co particles. It was found that at a given thickness of the Co island the Fermi level was shifted by 1.8-1.9 eV toward higher binding energy and the DOS decreased or no states were detectable at the Fermi level. This effect was explained by the formation of small Co particles with electronic structure which is significantly different from that of the bulk Co.