There is significant interest in recent years in developing magnetic nanoparticles (MNPs) having multifunctional characteristics with complimentary roles. In this study, we investigated the drug delivery and magnetic resonance imaging (MRI) properties of our novel oleic acid-coated iron-oxide and pluronic-stabilized MNPs. The drug incorporation efficiency of doxorubicin and paclitaxel (alone or in combination) in MNPs was 74-95%; the drug release was sustained and the incorporated drugs had marginal effects on physical (size and zeta potential) and magnetization properties of the MNPs. The drugs in combination incorporated in MNPs demonstrated highly synergistic antiproliferative activity in MCF-7 breast cancer cells. The T2 relaxivity (r(2)) was higher for our MNPs than Feridex IV, whereas the T1 relaxivity (r(1)) was better for Feridex IV than for our MNPs, suggesting greater sensitivity of our MNPs than Feridex IV in T2 weighted imaging. The circulation half-life (t(1/2)), determined from the changes in the MRI signal intensity in carotid arteries in mice, was longer for our MNPs than Feridex IV (t(1/2)=31.2 vs. 6.4 min). MNPs with combined characteristics of MRI and drug delivery could be of high clinical significance in the treatment of various disease conditions.