Uniformly sized and shaped iron oxide nanoparticles with a mean size of 25 nm were synthesized via decomposition of iron-oleate. High resolution transmission electron microscopy and Mössbauer spectroscopy investigations revealed that the particles are spheres primarily composed of Fe3O4 with a small fraction of FeO. From Mössbauer and static magnetization measurements, it was deduced that the particles are superparamagnetic at room temperature. The hydrophobic particles were successfully transferred into water via PEGylation using nitrodopamine as an anchoring group. IR spectroscopy and thermogravimetric analysis showed the success and efficiency of the phase transfer reaction. After PEGylation, the particles retained monodispersity and their magnetic core remained intact as proven by photon cross-correlation spectroscopy, ac susceptibility, and transmission electron microscopy. The particle aqueous suspensions revealed excellent water stability over a month of monitoring and also against temperature up to 40 °C. The particles exhibited a moderate cytotoxic effect on in vitro cultured bone marrow-derived macrophages and no release of inflammatory or anti-inflammatory cytokines. The PEGylated particles were functionalized with Herceptin antibodies via a conjugation chemistry, their response to a rotating magnetic field was studied using a fluxgate-based setup and was compared with the one recorded for hydrophobic and PEGylated particles. The particle phase lag rose after labeling with Herceptin, indicating the successful conjugation of Herceptin antibodies to the particles.