PURPOSE: To provide a reaction product having uniform particle diameters and excellent dispersion by effecting the reaction of a metal carbonyl with a nitrogen compound in two specified steps in producing a colloid of fine metal nitride particles or a magnetic fluid of metal nitride.

CONSTITUTION: A metal carbonyl (e.g. iron carbonyl) is reacted with a nitrogen compound (e.g. ammonia) in a solvent preferably in the presence of a surface active agent at a relatively low temperature to produce a precursor comprising a nitroge-containg metal carbonyl compound [e.g. Fe2(CO)6(NH2)2]. The reaction temperature is then raised to decompose the precursor into fine particles of a metal nitride (e.g. iron nitride), thus producing a colloid of fine metal nitride particles or a magnetic fluid of metal nitride. In this technique, a by-product such as Fe(CO)5 will not be produced; therefore, no reduction in the yield of an objective material due to the formation of noncrystalline iron originating in the by-product will not occur.