Ultrafine Fe particles have been prepared by the inert gas condensation method and subsequently oxygen passivated. The as-obtained particles consist in an Fe core surrounded by an amorphous Fe-oxide surface layer. The antiferromagnetic character of the Fe-oxide surface induces an exchange anisotropy in the ferromagnetic Fe core when the system is field cooled. Samples have been heat treated in vacuum at different temperatures. Structural changes of the Fe–O layer have been monitored by x-ray diffraction and transmission electron microscopy. Magnetic properties as coercivity, hysteresis loop shift, and evolution of magnetization with temperature have been analyzed for different oxide crystallization stages. A decrease of the exchange anisotropy strength is reported as the structural disorder of the surface oxide layer is decreased with thermal treatment. © 1999 American Institute of Physics.