Oleic acid modified iron oxide nanoparticles (IONs) with different sizes were synthesized and mixed with styrene-butadiene-styrene block copolymer (SBS) with a lamellar structure. The octadecene segments on the oleic acid molecules have chemical affinity with the polybutadiene (PB) blocks, which makes IONs tend to be selectively confined in the microphase-separated PB domains. However, the dispersion state strongly depends on the ratio of the particle diameter (d) to the lamellar thickness (l) of the PB domains, which further changes the phase separation of SBS. When d/l ∼0.5, most of IONs are concentrated in the middle of the PB layers at low particle loading. Upon increasing the particle loading, part of IONs contact each other to form long strings due to their strong magnetic interactions. Away from the strings, IONs are either selectively dispersed in the middle and at the interfaces of the PB domains, or randomly distributed at some regions in which the phase separation of SBS is suppressed. The phase separation of SBS transforms from the lamellar structure to a cylinder structure when the IONs loading is higher than 16.7 wt %. As d is comparable to l, IONs aggregate to form clusters of 100 to 300 nm in size, but within the clusters IONs are still selectively dispersed in the PB domains instead of forming macroscopic phase separation. It is interpreted in terms of the relatively small conformational entropy of the middle blocks of SBS; thus, incorporation of nanoparticles does not lead to much loss of conformational entropy. Although incorporation of IONs with d/l ∼1 significantly increases the interfacial curvature and roughness, it has less influence on the phase separation structure of SBS due to the inhomogeneous dispersion. When d is larger than l, IONs are macroscopically separated from the SBS matrix to form clusters of hundreds of nanometers to several micrometers. More interestingly, the phase separation of SBS transforms from the lamellar structure to a two-phase co-continuous structure, probably due to the rearrangement of SBS molecules to cover the clusters with PB segments and the strong magnetic interaction exerting additional force on the SBS matrix during the evaporation of the solvent and the subsequent thermal annealing process.