The invention discloses an aqueous method of making polymer coated superparamagnetic nanoparticles. The method comprises providing a mixture of iron salts in an aqueous solution of hydrochloric acid. A solution of ammonium hydroxide is added to the mixture and stirred. Stirring continues with an aqueous solution of one or more biocompatible polymers so as to promote formation of polymer coated iron nanoparticles in suspension, wherein optionally at least one of the polymers in the coating may be aminated. Centrifuging the suspension leaves a supernatant without large particles. Filtering the supernatant through an ultrafiltration membrane and collecting the filtrate recovers polymer coated nanoparticles. Crosslinking the polymer is effected by treatment with a solution of epichlorohydrin and sodium hydroxide while stirring vigorously for up to about eight hours. Optionally aminating the polymer may be accomplished by treatment with ammonia after crosslinking and then removing remaining free epichlorohydrin. Nanoparticles made by the method are included in the invention.