The integration of ferromagnetic Mn5Ge3 with the Ge matrix is promising for spin injection in a silicon-compatible geometry. In this paper, we report the preparation of magnetic Mn5Ge3 nanocrystals embedded inside the Ge matrix by Mn ions implantation at elevated temperature. By X-ray diffraction and transmission electron microscopy, we observe crystalline Mn5Ge3 with variable size depending on the Mn ion fluence. The electronic structure of Mn in Mn5Ge3 nanocrystals is 3d6 configuration, the same as in bulk Mn5Ge3. A large positive magnetoresistance has been observed at low temperatures. It can be explained by the conductivity inhomogeneity in the magnetic/semiconductor hybrid system.