Graphite-Co composites produced by intercalating potassium into graphite to give C8K, followed by reaction with CoCl2 and reduction of Co were characterized by x-ray diffraction, scanning electron microscopy, Auger electron spectroscopy, and secondary ion mass spectrometry. The results indicate that the Co in the composites is present both between graphite layers, in the form of atomically dispersed metal (intercalated into graphite), and on the surface of the graphite support, in the form of nanoparticles. Heat treatment of the nanocomposites in several steps increases the amount of cobalt on the graphite surface relative to that between the graphite layers owing to the outdiffusion of cobalt atoms from the interlayer spaces. Heating markedly increases the magnetic susceptibility of the graphite-Co composites, also by virtue of the Co diffusion to the surface of the graphite particles and the formation of Co agglomerates.