Carbon-coated Co and Ni nanocrystallites were effectively synthesized by an AC arc discharge method under an N₂ atmosphere with yields over 80%. The metal content of as-made Co and Ni samples was determined by a thermogravimetric method and it was found that the metal content increased by raising the metal loading ratio in the electrodes. The morphology, structure and magnetic properties of the Co and Ni samples were investigated by transmission electron microscope, x-ray powder diffractometer and vibrating sample magnetometer, respectively. In addition to the carbon-coated Co and Ni nanocrystallites, a small number of carbon nanotubes were also observed in the as-made Co and Ni samples. The values of saturation magnetization (M_s) for the sample containing 26.2 wt% of Co and the sample containing 37.6 wt% of Ni prepared under N₂ gas were 21.7 and 14.0 emu g⁻¹, respectively. However, M_s for 28.8 wt% of Co and 40.9 wt% of Ni prepared under He gas were 16.8 and 9.0 emu g⁻¹, respectively. This suggested that the carbon-coated Co and Ni nanocrystallites prepared under N₂ gas had larger values of M_s than that of those prepared under He gas.