Size control of core@shell nanostructures is still a challenge. Carbon encapsulated iron nanoparticles (CEINPs) were synthesized by arc discharge plasma method in this study. CEINPs size can be controlled by varying gas composition, due to change in plasma properties. The morphology and structural features were investigated using scanning electron microscopy, transmission electron microscopy (TEM) and high-resolution TEM. Magnetic properties were studied to confirm the changes in CEINPs size by using superconducting quantum interference device. In order to evaluate the carbon shell protection and ensure the absence of iron oxide, selected area electron diffraction technique, energy-dispersive x-ray spectroscopy and electron energy loss spectroscopy were employed. Moreover, the degree of carbon order-disorder was studied by Raman Spectroscopy. It was concluded that arc discharge method is a suitable technique for precise size control of CEINPs.