Microstructural and magnetic measurements of the evolution by heat treatment of initially amorphous Nd16Fe76B8 alloys prepared by melt spinning are presented. Evidence of magnetic hardening above a threshold temperature induced by magnetic isolation of the Nd2Fe14B grains is provided. A thermodynamic and kinetic explanation of local melting of the intergranular nanostructured Nd¿rich eutectic phase at temperatures below 900 K based on capillary effects is presented. A subsequent Ostwald ripening process moves Nd to wet intimately the hard magnetic grains, becoming, on cooling, a real paramagnetic isolating thin film (~2.5 nm). By using a simple analogy, it is shown that the switching magnetization field in a single¿domain crystal can be drastically affected through the exchange coupling to neighboring grains with different orientation of the easy axis. This effect should be important enough to reinforce the coercive field of polycrystalline hard magnetic materials and explains the observed enhancement from 0.9 to 1.9 T.