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Phase-separated semiconductors containing magnetic nanostructures are relevant systems for the realization of high-density recording media. Here, the controlled strain engineering of Ga δ FeN layers with Fe y N embedded nanocrystals (NCs) via Al x Ga 1 − x N buffers with different Al concentration 0 < x Al < 41 % is presented. Through the addition of Al to the buffer, the formation of predominantly prolate-shaped ε -Fe 3 N NCs takes place. Already at an Al concentration x Al ≈ 5% the structural properties—phase, shape, orientation—as well as the spatial distribution of the embedded NCs are modified in comparison to those grown on a GaN buffer. Although the magnetic easy axis of the cubic γ '-Ga y Fe 4 − y N nanocrystals in the layer on the x Al = 0 % buffer lies in-plane, the easy axis of the ε -Fe 3 N NCs in all samples with Al x Ga 1 − x N buffers coincides with the [ 0001 ] growth direction, leading to a sizeable out-of-plane magnetic anisotropy and opening wide perspectives for perpendicular recording based on nitride-based magnetic nanocrystals. [ABSTRACT FROM AUTHOR]