Graphite encapsulated metal nanocrystals (GEM nanocrystals) are a promising new class of materials with both scientific and industrial significance. Several encapsulating graphite layers protect the nanoscale metallic core without compromising the inherent magnetic properties of the metal, thereby enhancing studies of small particle magnetism. The size and single domain nature of these particles immediately suggest a wide variety of potential applications ranging from increased density magnetic data storage to immunoassays. Encapsulated nanoparticles have traditionally been synthesized by evaporating a composite metal/graphite anode via an electric arc. While effective, that method also results in a great deal of unwanted amorphous carbon debris in the product. Based on past synthesis runs and observations, an improved apparatus for GEM production has been designed with the goals of increasing GEM yield and reducing soot production. The four segment system consists of I ) a chamber capable of arc or resistive evaporation of raw material(s), 2) a tube furnace for the chemical vapor deposition of carbon on raw material(s) via hydrocarbon dissociation, 3) an increased-efficiency powder collection unit, and 4) a final powder reservoir. Details of the new apparatus are presented here.