Nanoparticles of silver and nickel were grown in thermally evaporated fatty acid (stearic acid) films by immersion of the film sequentially in solutions containing Ag+ ions and Ni2+ ions. Attractive electrostatic interaction between the metal cations and the carboxylate ions in the fatty acid film leads to entrapment of the cations in the film. Thereafter, the metal ions were reduced in situ to yield nanoparticles of Ag and Ni of ∼30 nm diameter within the fatty acid matrix. Thermal treatment of the stearic acid-(silver+nickel) nanocomposite films led to the formation of a Ni-Ag alloy at ∼100 °C. Prolonged heat treatment at this temperature resulted in the phase separation of the alloy and the reformation of individual Ag and Ni nanoparticles.