Core-shell nanostructures of carbon encapsulated iron nanoparticles (CEINPs) show unique properties and technological applications, because carbon shell provides extreme chemical stability and protects pure iron core against oxidation without impairing the possibility of functionalization of the carbon surface. Enhancing iron core magnetic properties and, in parallel, improving carbon shell sealing are the two major challenges in the synthesis of CEINPs. Here, we present the synthesis of both CEINPs and a new carbon encapsulated multi-iron nanoparticle by a new modified arc discharge reactor. The nanoparticle size, composition, and crystallinity and the magnetic properties have been studied. The morphological properties were observed by scanning electron microscopy and transmission electron microscopy. In order to evaluate carbon shell protection, the iron cores were characterized by selected area diffraction and fast Fourier transform techniques as well as by electron energy loss and energy dispersive X-ray spectroscopies. Afterward, the magnetic properties were investigated using a superconducting quantum interference device. As main results, spherical, oval, and multi-iron cores were controllably synthesized by this new modified arc discharge method. The carbon shell with high crystallinity exhibited sufficient protection against oxidation of pure iron cores. The presented results also provided new elements for understanding the growth mechanism of iron core and carbon shell.