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Nanocrystalline iron powders were produced by means of gas condensation. Pure nitrogen, or oxygen, or air, was introduced into the as-made powders before they were taken from the chamber. Different atmospheres produced different layer structures around the iron particles. A high resolution transmission electron microscope was used to analyze the crystal structure and a vibrating-sample magnetometer was used to measure the magnetic properties of nanocrystalline iron particles. The results showed that a layer of amorphous or nanocrystalline structure was formed initially on the surface of iron particles. This thin amorphous layer crystallized into Fe3O4 after annealing under electron irradiation when the introduced atmosphere was pure oxygen or air. However, it formed a passivated layer of ζ-Fe2N when nitrogen was introduced. A hydrogen-reducing process was employed to remove the oxide layer from the surface of nanocrystalline iron particles. The clean surface led to increased magnetization. The exchange anisotropy between the iron core and the superficial iron oxide or nitride shell was observed as the sample was cooled in an applied field of 10 kOe from room temperature to 5 K. The shift of the hysteresis loop caused by exchange anisotropy was 16% for the nitride shell and 8% for the oxide shell.