Nanocomposite materials provide the possibility for multifunctional properties in contrast with their more-limited single-component counterparts. Here, we report the synthesis and characterization of the first all-inorganic core/shell hybrid magnetic-optical nanoparticle, cobalt/cadmium selenide. The core/shell nanocrystals are prepared in a facile one-pot reaction, and their microstructure is analyzed using low- and high-resolution transmission electron microscopy. Using magnetic and optical characterization, we demonstrate bifunctional behavior, whereby the core retains the magnetic properties of the starting Co nanoparticle, and the shell emits similarly to a single-component CdSe nanoparticle. Interestingly, while the coercivity was found to be unchanged by shell formation, the blocking temperature for the composite structure was observed to be substantially lower (Co: >350 K; Co/CdSe: 240 K). In addition, we observed that at low temperatures (20 K) shell CdSe photoluminescence (PL) decay was very rapid (<1 ns). In contrast, nanocrystalline CdSe PL decay is typically much slower at such temperatures (>50 ns). Finally, we propose possible explanations for the unusual magnetic and optical behavior of the core/shell hybrid nanostructures.