Phase composition of iron silicide nanocrystals (NCs) in the course of formation by solid phase epitaxy (SPE) method, and embedding into silicon was studied. It was found that SPE of 0.4-nm-thick Fe film at 630 °C resulted in formation of small (less than 29.5 nm) and big (more than 42.6 nm) NCs. The former contained only β-FeSi2 phase and the latter consisted of β-FeSi2 and ɛ-FeSi phases. Annealing of these NCs at 750 °C for 90 min led to transformation of β-FeSi2 and ɛ-FeSi into α-FeSi2 NCs. However, when the as-grown NCs have been covered with silicon layer with thickness of 25 -380 nm at 750 °C, they turned into β-FeSi2 NC. Epitaxial relationship and crystal lattice deformation obtained for β-FeSi2 NCs covered by Si layer is favorable for indirect to direct band gap transition.