Co:Cr2O3 nanocomposites were prepared with phase separated metallic Co clusters in a wide range of concentrations namely 10, 20, 30, 40 and 50 wt% Co. Samples were annealed at different temperatures to study the effects of crystallization of Cr2O3 and the growth of Co metal clusters on the magnetic behavior of nanocomposites. Enhanced crystallinity of antiferromagnetic (Cr2O3) matrix and growth of Co clusters with higher annealing temperatures strongly affects the coercivity, saturation and magnetic viscosity in these hybrid materials. Amorphous Cr2O3 acts as a paramagnetic matrix for Co particles. Exchange anisotropy stabilizes magnetic moments of Co embedded in Cr2O3 only if Cr2O3 is crystalline. This exchange anisotropy leads to the enhancement of coercivity. Relaxation measurements confirm that exchange anisotropy is higher for samples with lower Co content. (C) 2009 Elsevier B.V. All rights reserved.