Cobalt nanoparticles in Co–Al2O3 films have been deposited by rf‐magnetron co‐sputtering of cobalt and alumina on Si <100> substrate. X‐ray diffraction (XRD) patterns were collected at room temperature for the as‐deposited as well as annealed thin films. The appearance of (002) reflection in XRD pattern indicates the presence of hcp‐Co nanoparticles with oriented growth along c‐axis. The scanning electron microscopy (SEM) result shows the formation of truncated hexagonal nanoparticles at elevated temperatures. Rutherford backscattering (RBS) has also been performed to estimate the film thickness. The effect of grain growth, after annealing at higher temperature, on surface roughness has also been studied using atomic force microscopy (AFM). Magnetic measurements carried out at room temperature both in parallel and perpendicular configuration reveal easy axis orientation along in‐plane direction. However, a large value of coercivity along c‐axis was attributed to the pinning due to the presence of oxide at grain boundaries. The pinning effect was also confirmed by the way of generating hysteresis using Monte Carlo simulation in a system of randomly distributed clusters of single domain interacting particles.