Fe₃O₄ magnetic nanoparticles (Fe₃O₄-MN) capped with either oleic acid (Fe₃O₄-OA-MN) or polyethylene glycol (Fe₃O₄-PEG-MN) were prepared by a co-precipitation method. From X-ray diffraction studies, the average crystallite sizes of Fe₃O₄-MN, Fe₃O₄-OA-MN and Fe₃O₄-PEG-MN were found to be 12, 6 and 8 nm, respectively. A reduction in the agglomeration of particles was observed when the magnetic nanoparticles (MN) were capped with oleic acid (OA) and polyethylene glycol (PEG), as confirmed by a transmission electron microscopy study. Magnetization of these MN was almost zero at room temperature in the absence of an applied magnetic field, indicating their superparamagnetic behavior. Magnetization was lower and the superparamagnetic fraction was higher for Fe₃O₄-OA-MN and Fe₃O₄-PEG-MN compared to Fe₃O₄-MN studied using a Mössbauer spectrometer. Compared to the control, an increased killing (35%) was observed in human breast cancer cells (MCF7) after Fe₃O₄-OA-MN treatment, which was further enhanced (65%) under induction heating conditions. However, MCF7 cells treated with Fe₃O₄-MN or Fe₃O₄-PEG-MN showed 5–10% killing after induction heating. These results showed the characterization of MN with different lipophilicity and suggests their suitability for hyperthermia applications in cancer therapy.