La0.7Sr0.3Mn1-xCoxO3 (x = 0, 0.05, 0.1) nanoparticles, prepared by sol-gel method, were studied by means of X-ray diffraction, transmission electron microscopy, resistivity, magnetoresistance, thermal expansion and magnetostriction measurements. Results show that partial substitution of Mn by Co leads to a reduction in lattice parameters, enhancement of resistivity and room temperature magnetoresistance MR, decrease of metal-insulator transition temperature T-MI and T-C, an increase in thermal expansion coefficient, volume magnetostriction and anisotropic magnetostriction. The latter increases about one order of magnitude with 10% Co substitution. In comparison with Mn ions, the Co ions possess higher anisotropy energy, larger magnetostriction effect, smaller ionic size and spin state transitions with increase in temperature and magnetic field; this suggests that Co substitution leads to double-exchange interaction weakening, resulting in suppression of ferromagnetic long-range order and metallic state and increase of magnetic anisotropy. Furthermore, our samples have a relatively lower T-MI and T-C, higher resistivity and MR, compared with the reported values for similar compounds with larger particle sizes. This is attributed to the nanometric grain size and spin-polarized tunneling between neighboring grains. (C) 2010 Elsevier B.V. All rights reserved.