We have developed a magneto-optical Bi1.8Y1.2Fe5O12 nanoparticle hybrid material and milling system. The Bi1.8Y1.2Fe5O12 nanoparticles were prepared with a coprecipitation and annealing processes. The 100 h milling nanoparticle system has θF about 1×103 degrees/cm but it has very small Ms (∼2.5 emu/cm3). In this material system, the particle size and crystalline size of the nanoparticles were estimated with a transmission electron microscope and transmission electron diffraction methods. The crystal phase sizes of the Bi1.8Y1.2Fe5O12 nanoparticles are the same as the nanoparticle sizes. The high-powered transmission electron microscope images show moiré fringes of the nanoparticles. The 5–8 nm particles are primary nanoparticles. We show a possibility of the synthesis for the crystalline nanoparticles dispersed in hybrid materials by mechanical milling process.