Ultrafine iron-cobalt alloy powders having diameters less than 0.1 micron were manufactured by hydrogen reduction of vapor mixtures of iron(II) chloride and cobalt(II) chloride. The effects of the following variables on chemical, morphological and magnetic properties of the powders were experimentally investigated : composition of iron and cobalt in the alloy powder, concentration of the metal chlorides in the vapor, flow rates of hydrogen and carrier gas(argon), conditions for the post-formation of oxide films on the powder surface, and the magnetic field applied where the powder is formed. Particle size distribution, chemical compositions of impurities, crystal structure and magnetic properties of the powders were measured using ICP, PIXE, XRD, EDS, XPS, TEM and VSM. The average particle size of the powder was in the range of 0.025 to 0.045 micron. Most of oxygen and chlorine, major impurities in the powder, were observed to exist on the surface of the powder. By applying a magnetic field where the powder is being formed, the curved chain of iron-cobalt alloy particles was straightened, and a higher coercive force was obtained. The maximum coercive force of the iron-cobalt powders was 1,466 oersted. The saturation magnetization of the powder ranged from 130 to 180 emu/g.