The binary alloy Mn0.5+xBi0.5−x, x ⩽ 0.05, is a promising rare-earth-free magnetic material, with high-energy-density (a critical characteristic for electric motors and power electronics), low cost, and significant magnetic properties for multiple uses at room temperature. In this article, we report how a free Bi, when precipitated over Mn0.5+xBi0.5−x (x ⩽ 0.05) of small crystallites, diffuses back into a stable Mn0.5+xBi0.5−x, x → 0, via a peritectic reaction, which facilitates preferential growth of small core–shell crystallites with multiple facets, having the potential for tailored magnetic properties. This growth travels slowly in the anisotropic channels of vacancies on annealing the reactive nanopowder at a critical 573 K temperature in Ar gas. Thus, an initial crystallite size of D ∼ 27 nm grows to only 38 nm in a reaction extended over a period of 96 h. A transient phase, x > 0, which has Bi vacancies, primarily grows in the (101) and (110) facets, filling the vacancies over a 6.41% larger crystal density. If any excess Mn is present, it segregates over a saturated phase, combines with free Bi, and ultimately forms a stable alloy phase. The small crystallites contain an inbuilt surface Bi-layer (shell), with a 1–2 nm thickness, in a core–shell of nanoplates (20–60 nm width), as shown in the high resolution transmission electron microscope images. In the proposed microscopic model, with hybridized Mn-d5 and Bi-p3 electrons (also spins), the magnetic properties are readily controlled. Thus, at 300 K, a maximum coercivity Hc = 9.850 kOe (14.435 kOe at 350 K) develops (Hc = 5.010 kOe in the initial) in critical single domains (D ∼ 33 nm). A net 72.5 emu g−1 magnetization occurs, with an enhanced TC = 641.5 K (600.5 K at x ∼ 0.05) on an order of enhanced anisotropy constant K1, demonstrating the significant effects of this core–shell structure of small crystallites.