Fe/$SiO_2$ core-shell type composite nanoparticles have been synthesized using a reverse micelle process combined with metal alkoxide hydrolysis and condensation. Nano-sized $SiO_2$ composite particles with a core-shell structure were prepared by arrested precipitation of Fe clusters in reverse micelles, followed by hydrolysis and condensation of organometallic precursors in micro-emulsion matrices. Microstructural and chemical analyses of Fe/$SiO_2$ core-shell type composite nanoparticles were carried out by TEM and EDS. The size of the particles and the thickness of the coating could be controlled by manipulating the relative rates of the hydrolysis and condensation reaction of TEOS within the micro-emulsion. The water/surfactant molar ratio influenced the Fe particle distribution of the core-shell composite particles, and the distribution of Fe particles was broadened as R increased. The particle size of Fe increased linearly with increasing $FeNO_3$ solution concentration. The average size of the cluster was found to depend on the micelle size, the nature of the solvent, and the concentration of the reagent. The average size of synthesized Fe/$SiO_2$ core-shell type composite nanoparticles was in a range of 10-30 nm and Fe particles were 1.5-7 nm in size. The effects of synthesis parameters, such as the molar ratio of water to TEOS and the molar ratio of water to surfactant, are discussed.