Spherical carbon coated iron particles of nanometric diameter in the 5-10 nm range have been produced by arc discharge at near-atmospheric pressure conditions (using 5-8 x 10(4) Pa of He). The particles exhibit a crystalline dense iron core with an average diameter of 7.4 +/- 2.0 nm surrounded by a sealed carbon shell, shown by transmission electron microscopy (TEM), selected-area diffraction (SAED), energy-dispersive X-ray analysis (STEM-EDX) and electron energy loss spectroscopy (EELS). The SAED, EDX and EELS results indicate a lack of traces of core oxidized phases showing an efficient protection role of the carbon shell. The magnetic properties of the nanoparticles have been investigated in the 5-300 K temperature range using a superconducting quantum interference device (SQUID). The results reveal a superparamagnetic behaviour with an average monodomain diameter of 7.6 nm of the nanoparticles. The zero field cooled and field cooled (ZFC-FC) magnetization curves show a blocking temperature (T(B)) at room temperature very suitable for biomedical applications (drug delivery, magnetic resonance imaging, hyperthermia).