We present a detailed transmission electron microscopy study of the structure and distribution of self-organized Fe-rich nanocrystals in (Ga,Fe)N grown via metal-organic vapor phase epitaxy (MOVPE). In samples with a concentration of magnetic ions above the solubility limit-x >= 0.4%-of Fe in GaN at the growth conditions we can identify three different phases of the Fe-rich enclosures, namely: (a) alpha-Fe segregated in proximity of the surface, (b) epsilon-Fe3N in the volume beneath, though well above the nominal interface between the undoped GaN buffer and the Fe-doped overlayer, and (c) nanocrystals at an intermediate location showing the presence of adjacent alpha-Fe and epsilon-Fe3N. These observations suggest that nitrogen evaporation at the growing surface play an important role in the formation of Fe-rich phases. The occurrence of alpha-Fe and epsilon-Fe3N in the same nanocrystal indicates that the two phases are actually correlated: phase separation may first lead to the precipitation of epsilon-Fe3N which inherits the hexagonal structure of GaN but generates misfit dislocations, and then a further depletion of nitrogen promotes the conversion of epsilon-Fe3N into alpha-Fe. (C) 2008 Elsevier B.V. All rights reserved.