The immobilization of proteins on gold-coated magnetic nanoparticles and the subsequent recognition of the targeted proteins provide an effective means for the separation of proteins via application of a magnetic filed. A key challenge is the ability to fabricate such nanoparticles with the desired core-shell nanostructure. In this article, we report findings of the fabrication and characterization of gold-coated iron oxide (Fe2O3 and Fe3O4) core@shell nanoparticles (Fe oxide@Au) toward novel functional biomaterials. A hetero-interparticle coalescence strategy has been demonstrated for fabricating Fe oxide@Au nanoparticles that exhibit controllable sizes ranging from 5 to 100 nm and high monodispersity. Composition and surface analyses have proven that the resulting nanoparticles consist of the Fe2O3 core and the Au shell. The magnetically active Fe oxide core and thiolate-active Au shell were shown to be viable for exploiting the Au surface protein-binding reactivity for bioassay and the Fe oxide core magnetism for magnetic bioseparation. These findings are entirely new and could form the basis for fabricating magnetic nanoparticles as biomaterials with tunable size, magnetism, and surface binding properties.