Herein we report a new method for synthesizing stabilized magnetic nanoparticle (MNP) colloids. A new class of monodisperse water-soluble magnetite nano-particles was prepared by a simple and inexpensive co-precipitation method. Iron ions and iodine were prepared by the reaction between ferric chloride and potassium iodide. The ferrous and ferric ions were hydrolyzed at low temperature at pH 9 in the presence of iodine to produce iron oxide nanoparticles. The natural product myrrh gum was used as capping agent to produce highly dispersed coated magnetite nanoparticles. The structure and morphology of the magnetic nanogel was characterized by Fourier transform infrared spectroscopy (FTIR) and transmission electron microscopy (TEM), and X-ray diffraction (XRD) was used to examine the crystal structure of the produced magnetite nanoparticles.