In this article, we report the design and synthesis of a series of well-dispersed superparamagnetic iron oxide nanoparticles (SPIONs) using chitosan as a surface modifying agent to develop a potential T2 contrast probe for magnetic resonance imaging (MRI). The amine, carboxyl, hydroxyl, and thiol functionalities were introduced on chitosancoated magnetic probe via simple reactions with small reactive organic molecules to afford a series of biofunctionalized nanoparticles. Physico-chemical characterizations of these functionalized nanoparticles were performed by TEM, XRD, DLS, FTIR, and VSM. The colloidal stability of these functionalized iron oxide nanoparticles was investigated in presence of phosphate buffer saline, high salt concentrations and different cell media for 1 week. MRI analysis of human cervical carcinoma (HeLa) cell lines treated with nanoparticles elucidated that the amine-functionalized nanoparticles exhibited higher amount of signal darkening and lower T2 relaxation in comparison to the others. The cellular internalization efficacy of these functionalized SPIONs was also investigated with HeLa cancer cell line by magnetically activated cell sorting (MACS) and fluorescence microscopy and results established selectively higher internalization efficacy of amine-functionalized nanoparticles to cancer cells. These positive attributes demonstrated that these nanoconjugates can be used as a promising platform for further in vitro and in vivo biological evaluations. © Springer Science+Business Media B.V. 2011.