We report on the phase stability and phase formation of Nd–Fe–B nanoparticles from the gas phase in the size range from 10 to 25 nm. Particular attention is paid to the question, if the intermetallic $$\hbox {Nd}_{2}\hbox {Fe}_{14}\hbox {B}$$Nd2Fe14B phase also forms in free particles with a few nanometers in size that grow without contact to any solid or liquid matrix in a low pressure Ar atmosphere. The paper also addresses the possible influence of segregation phenomena that go along with the phase formation and the effect of (rapid) thermal annealing on the structure and phase stability of the particles. Aberration-corrected transmission electron microscopy in combination with spectroscopic methods was used to determine the local atomic structure and the chemical composition of the particles. Unheated particles are found to be mainly amorphous, while the rapidly optically annealed particles are crystalline. In both cases, we observe an enrichment of Nd in the shell of the particles and a Fe enrichment in the core. This segregation of Nd toward the particles' surface is more pronounced in heated particles, which form a clear core-shell structure with a Fe core surrounded by a $$\hbox {Nd}_{2}\hbox {O}_{3}$$Nd2O3 shell. This finding is attributed to the comparably small surface energy and the higher affinity of Nd to oxygen as compared to Fe. A simple model is introduced and used in order to estimate these surface energies. These estimations support the experimentally observed segregation phenomena. It is further found that B prefers the vicinity of Fe over that of Nd atoms, which as a consequence leads to a B enrichment in the Fe-rich parts of the particles. Magnetic measurements show a soft magnetic behavior for both, unheated and heated Nd–Fe–B nanoparticles.