Nanoparticles of iron were prepared in distilled water using very thin iron wires and sheets, by the electro-exploding wire technique. Transmission electron microscopy reveals the size of the nanoparticles to be in the range 10 to 50 nm. However, particles of different sizes can be segregated by using ultrahigh centrifuge. X-ray diffraction studies confirm the presence of the cubic phase of iron. These iron nanoparticles were found to exhibit fluorescence in the visible region in contrast to the normal bulk material. The room temperature hysteresis measurements upto a field of 1.0 tesla were performed on a suspension of iron particles in the solution as well as in the powders obtained by filtration. The hysteresis loops indicate that the particles are superparamagnetic in nature. The saturation magnetizations was approximately 60 emu/gm. As these iron particles are very sensitive to oxygen a coating of non-magnetic iron oxide tends to form around the particles giving it a core-shell structure. The core particle size is estimated theoretically from the magnetization measurements. Suspensions of iron nanoparticles in water have been proposed to be used as an effective decontaminant for ground water.