Few nanometer large (<2 nm) inclusions of D O3 -phase structure have been identified in the A2 matrix of highly magnetostrictive Fe-19% Ga alloys by high-resolution transmission electron microscopy (HRTEM). In addition, we have found that these nanostructures include a high density of {100} line defects with a Burgers vector of abcc 2 100. This dispersion of D O3 -phase nanostructures formed within the main A2 matrix and the lifting of their coherency by defects are consistent with a recent theory for the structure and properties of magnetostrictive Fe-Ga and Fe-Al alloys. © 2008 The American Physical Society.