For the first time peptides were used as capping ligands for in situ synthesis of water-soluble cobalt nanoparticles (NP) with the aim to use these particles for biological applications. In this paper, we describe the synthetic method, and characterization of the samples by transmission electron microscopy (TEM), X-ray powder diffraction (XRD) and superconducting quantum interference device (SQUID) magnetometry. The peptides were found to facilitate the formation of nanoparticles and partly protect the nanoparticles from oxidation.