The effect of exchange anisotropy on nanosize Co particles was studied in Co-CoO nanocomposite thin films for possible applications for magnetic storage media. XRD analyses showed nanosize hcp Co particles and (111) textured CoO phase. A broken columnar structure was observed in cross-section TEM images. Very large room temperature coercivity (∼1 kOe) was observed and believed to be due to a shape effect and possible local exchange coupling. Large exchange anisotropy at low temperatures and linear type temperature dependence were explained by finite size effects and thermal relaxation of the CoO particles. A slow decrease of thermoremanent moment (TRM) with temperature and large TRM at room temperature indicated that the exchange anisotropy significantly modified the anisotropy energy barrier of the Co crystallites in the CoO matrix. The results indicated that the exchange anisotropy could be used to stabilize nanosize ferromagnetic particles.