Iron oxide particles have been recently researched for the potential applications of targeted drug delivery due to their magnetic properties. The surfaces of the iron oxide particles must be modified to reduce the toxicity and to load the drug to the particles. Biopolymers are good surface modifiers of colloidal particles such as iron oxide particles. The degree of surface coverage of the colloidal iron oxide particles affects the stability, toxicity, magnetic properties and drug loading efficiency. In this study, the interactions of iron oxide (Fe3O4) particles and PVP were determined according to the colloidal properties. The proper concentration of PVP for the whole coverage of the iron oxide particles was found for the possible magnetic drug delivery applications by controlling the colloidal properties of the dispersions. The magnetic properties and toxicity of the fully covered bioiron oxide was also determined for possible applications.