An increase of coercive field with decreasing particle size has been observed in a ball milled nanocomposite consisting of Fe rich nanocrystals embedded in an amorphous matrix. This type of behavior can be caused by two different effects: the introduction of strong lattice strain fields and structural defects with milling and a dependence of coercivity with particle size. Both effects have been analyzed. It was found that they both likely contribute to the increase of coercivity and, therefore, to a deterioration of the outstanding soft magnetic properties of the mother material.