Nanocomposites containing Fe or FeCo (Fe-rich) dispersed in hexaferrites (M, W, or Y phase) are realized by the heterogeneous solid-gas reduction under H 2 ϩ N 2 . Transmission electron microscopy (TEM) studies show that metal nanoparticles precipitate coherently as thin flakes along the a-b planes of the hexaferrite lattice above the characteristic reduction temperature, T R Ͼ 375°C. The electrical resistivity measurements reveal that the charge transport mechanism in the composites is by tunneling, whereas samples having higher fractions of the alloy particles show metallic behavior. Controlled reduction at T R leads to apparent insulator-metal changeover in the ρ versus T plot. This changeover persists even in the presence of a high magnetic field (7 T) and is ascribed to the percolation of metal particles caused by the difference in the coefficient of thermal expansion between the constituents. In the insulator regime, negative magnetoresistance (MR) of ϳ5-9% is observed at 25°C. Further, ρ-T curves by the two-probe method exhibit hysteretic behavior caused by large inhomogeneity in the distribution of metal content and the timedependent charge accumulation (Coulomb blockade) at the metal granules for these composites. They also exhibit nonlinearity in the current-voltage (I-V) characteristics with the nonlinearity coefficient ranging from 1.2 to 1.4 at different temperatures.