The reliance of modern electronic era on ultrafast data recording has made the search for novel tools to tune nano-scale magnetic-anisotropy (MA) never-ending. We demonstrate a strong correlation between the spin-spin interactions, local atomic structure and the MA of Ni nanoparticles (NPs) embedded inside SiO2 matrix under swift heavy ion (SHI) irradiation. In contrast to traditional understandings, MA in Ni NPs along with their aspect ratio, first increases upto 5 × 1013 ions/cm2 SHI fluence (5e13) and gets reduced at highest fluence. Using angle dependent Extented-Xray-Absorption-Fine-Structure (EXAFS) and ab initio molecular dynamics (MD) simulations, we show that the anisotropy induced in local atomic structure upon irradiation is dependent on atomic spin-spin interactions, which gets reduced at highest fluence. The chosen model cluster (Ni38) used in our MD simulations is duly validated by comparing the pair-correlation-function of the structure with the EXAFS-Fourier-Transform. The lattice temperatures for the films irradiated at different fluences, as calculated from thermal-spike-model, are used for the respective MD runs. We conclude that the enhanced disorder in both the local atomic environment and spin alignment destroys the MA at the highest fluence in SHI irradiated Ni NPs. The findings therefore provide rich conceptual insights for designing magnetic devices using SHI-induced phenomena.