It is well-known that magnetic impurities can change the symmetry class of disordered metallic systems by breaking spin and time-reversal symmetry. At low temperature these symmetries can be restored by Kondo screening. It is also known that at the Anderson metal-insulator transition, wave functions develop multifractal fluctuations with power law correlations. Here, we consider the interplay of these two effects. We show that multifractal correlations open local pseudogaps at the Fermi energy at some random positions in space. When dilute magnetic impurities are at these locations, Kondo screening is strongly suppressed. We find that when the exchange coupling J is smaller than a certain value J * , the metal-insulator transition point extends to a critical region in the disorder strength parameter and to a band of critical states. The width of this critical region increases with a power of the concentration of magnetic impurities.Fifty years after its proposal, the Anderson metal-insulator transition (AMIT) of disordered noninteracting electrons [1] continues to be intensively studied [2,3,4,5]. The AMIT is a quantum phase transition of second order where the localization length diverges with a critical exponent ν. The critical state is multifractal and characterized by a wide distribution of wave function amplitudes with a log-normal shape [5]. One aspect which remains less understood is the interplay between the AMIT of conduction electrons and the dynamics of the spin of magnetic impurities. These can be induced by energy levels below the Fermi energy such as the d-levels of transition metal impurities [6] or by localized electronic states such as the dopant levels in semiconductors [7]. Magnetic moments can enhance the spin susceptibility and the specific heat as has been observed in Si:P close to the AMIT [8,9]. When local magnetic moments interact with the conduction electrons by an exchange interaction, they can break both spin degeneracy and time-reversal symmetry (TRS) of the conduction electrons. Therefore, they are expected to change the symmetry class of the electronic system from orthogonal to unitary [10], changing the critical exponent ν, the critical electron density n c , and the critical disorder strength W c at which the transition occurs [11,12]. At sufficiently low temperatures, an additional effect comes into play. The antiferromagnetic exchange interaction between spin-1/2 local moments and the conduction electrons in a metal leads to a correlated electron state where a Kondo singlet is formed, screening the local moments at temperatures below the Kondo temperature T K . In this limit, the magnetic susceptibility χ approaches a constant value, as indicated in the left inset of Fig. 1, and the magnetic moments cease to break the TRS of the conduction electrons. The situation is quite different in the insulating phase, where local spectral gaps ∆ I prevent the development of the Kondo screening whenever the exchange coupling J between local moments and conduction electrons is below a criti...