Magnetic nanoparticles of Fe and FePt intermetallic compound were synthesized in molten LiCl-KCl-CsCl electrolyte under 1 atm of Ar atmosphere using plasma-induced cathodic discharge electrolysis. First, a synthesis of fine and uniform Fe nanoparticles was successfully conducted at various Fe(II) ion concentrations. Fe nanoparticles less than 50 nm with a narrow distribution width were obtained at low Fe(II) ion concentration such as 0.1 mol%. When the flowed electricity was increased threefold while the concentration remained at 0.1 mol%, the obtained particle size increased to around 100 nm. Using the Fe nanoparticles obtained by the aforementioned method, FePt intermetallic compound nanoparticles with diameters around 100 nm were obtained by a displacement reaction between the dispersed Fe nanoparticles and dissolved Pt(II) ion in the melt, followed by a solid-phase interdiffusion of Pt and Fe.