In this paper, carbon-encapsulated nanoparticles of iron and iron nitride were synthesized using ferrocene by reactive radio-frequency thermal plasma. The properties of the prepared nano-powders were investigated by TEM, XRD, Raman spectroscopy and VSM. The samples obtained with zero-nitrogen plasma, contains the carbon-encapsulated iron nanoparticles. There cores mainly composed of ferromagnetic α-Fe and paramagnetic γ-Fe, with carbon shell thicknesses of about 5 nm. The samples synthesized by the plasma with varying nitrogen flow rates, mainly consists of iron nitride and oxide having spherical and irregular shape with deteriorated and disappearing carbon shell. Particle size in all samples were 20-90 nm. Synthesized sample at zero-nitrogen condition showed a room-temperature saturation magnetization of 19.65 emu/g, with a coercivity of 375.1 Oe. The sample prepared with optimal nitrogen flow rate had a saturation magnetization of 35.25 emu/g at room temperature, with a coercivity and remanence of 49.1 Oe and 0.56 emu/g, respectively.