Nanometer sized magnetic particles have been fabricated by aqueous phase coprecipitation inside single compartment vesicles. These vesicles were generated by sonicating egg yolk phosphatidylcholine molecules in an appropriate ionic solution containing the reactant cations. Using cobalt and ferric nitrate as the starting solution, the reaction product was the desired cobalt ferrite; direct formation of the oxide is potentially a very important step. For the barium and ferric nitrate systems, the reaction product could not be identified easily. However, we have not been able to produce barium ferrite directly. In an attempt to compare the effect of drastic changes in the microenvironment, we have also completed aqueous phase precipitation in multilamellar vesicles. For the aluminum nitrate system, precipitation takes place only in the outermost “annular” space. Multiple particles are formed, and the resultant diffraction pattern shows a close match with an aluminum hydroxide chloride complex. This differs significantly from the product in single compartment vesicles, where β-Al2O3 was formed, and in free precipitation which resulted in Al(OH)3.