Magnetic Fe-Co(C) nanocapsules and Fe-Co nanoparticles were prepared by arc-discharge in two kinds of atmospheres, i.e. methane and a mixture of ($H_2$+Ar), respectively. Characterization and magnetic properties of this two kinds of ultrafine particles were investigated systematically by means of X-ray diffraction, Mssbauer spectroscopy, X-ray photoelectron spectroscopy, transmission electron microscopy, energy disperse spectroscopy analysis, chemical analysis, oxygen determination and magnetization measurement. Effects of carbon element, decomposed from a methane atmosphere in carbon arc process, on phase structures, magnetic states and surface characterization were studied in comparison to that of Ar element. Two ultrafine particles showed a little difference in the weight ratio of (Fe/co) and the size for Fe-Co nanoparticles was about two times bigger than Fe-Co(C) nanocapsules. The saturation magnetization of Fe-Co (C) nanocapsules was about 8% higher than that of Fe-Co nanoparticles while their phase constitutions were similar. Although no carbon could be detected by XRD measurement because of extremely thin shells on the surfaces of the cores, it is still believed that they are carbon and oxygen layers.