A new and facile approach was established to fabricate thermoresponsive poly(N-isopropylacrylamide) (PNIPAA) coated iron oxide nanoparticles in a non-aqueous medium. The morphology and structure of the nanoparticle-doped composite were analyzed by means of transmission electron microscopy (TEM), x-ray powder diffraction (XRD), and Fourier transformation infrared spectrometry (FTIR). The thermosensitivity of the composite was also investigated. Results indicated that the oil-soluble iron oxide nanoparticles encapsulated with PNIPAA, composed of an inorganic iron oxide core and biocompatible PNIPAA shell, were dispersed well in water and had a sphere-like shape. The PNIPAA-coated iron oxide nanoparticles with such a kind of core-shell structure showed excellent thermosensitivity. Namely, the aqueous suspension of PNIPAA-coated iron oxide nanoparticles dramatically changed from transparent to opaque as the temperature increased from room temperature to 38 °C, showing potential as optical transmittance switch materials and their significance in the fields of protein adsorption and purification controlled release, and drug delivery.