Carbon-encapsulated cobalt particles were produced by a modified are-discharge technique and subsequently purified with an acid treatment. The arc discharge was realized between a graphite cathode and a graphite crucible with a solid Co target, under partial He pressure with an additional quenching jet. The produced particles are spherical and covered by typically 3-5 graphitic carbon shells. The mean diameter could be varied between 5 and 45 nm by changing the deposition parameters (gas pressure and flow rate of the quenching jet). The magnetic properties were analyzed with a variable temperature SQUID magnetometer. The encapsulated particles showed ferromagnetic hysteresis loops with marked size-dependent properties.