Crystalline iron boride (Fe2B) nanoparticles were successfully synthesized with magnesiothermic reduction reactions triggered by mechanochemical synthesis (MCS) and purified using selective hydrochloric (HCl) acid leaching. Various parameters of MCS were investigated in detail to optimize the synthesis conditions. First, Fe2O3/B/Mg powder mixtures were blended and milled for various durations (up to 8 h) using a high-energy ball mill until Fe2B formation was complete. For the milling optimization, two different ball-to-powder weight ratios (BPRs) were employed: 10/1 and 15/1. Different sizes of milling balls as MCS media were used to investigate their effects on the Fe2B formation. After the MCS experiments, powders were purified with a 4 M hydrochloric acid (HCl) solution to leach out the MgO by-product phase and to obtain pure Fe2B particles. Based on all the optimization studies, Fe2O3/B/Mg powders milled for 6 h using one φ 14.3 mm ball and five φ 12.4 mm balls with a 10/1 BPR and purified were selected as ideal products. Microstructural, thermal, rheological and magnetic properties were determined for the optimum Fe2B nanoparticles. This optimum batch comprising pure Fe2B nanoparticles (with an average size of 35 nm) was tested for biocompatibility (up to 72 h with 200 μg/mL) and specific absorption rate (SAR up to 55 °C) to evaluate its use in biomedical applications. The dose and time-dependent cytotoxicity of poly (acrylic acid) coated Fe2B nanoparticles (PAA-Fe2B) were investigated with cancerous HeLa, MCF7, A549 and MDA-MB-231 and healthy Vero E6 cells. PAA-Fe2B nanoparticles were found to be cytocompatible with Vero E6 cells, HeLa and MCF7 cancer cells. The SAR value of the Fe2B nanoparticles was determined as 9.15 W/g, so the synthesis mechanism and some properties of Fe2B nanoparticles were successfully proposed for possible biomedical applications.