Magnetic nanoparticles are promising molecular imaging agents due to their relatively high relaxivity and the potential to modify surface functionality to tailor biodistribution. In this work we describe the synthesis of magnetic nanoparticles using organic solvents with organometallic precursors. This method results in nanoparticles that are highly crystalline and have uniform size and shape. The ability to create a monodispersion of particles of the same size and shape results in unique magnetic properties that can be useful for biomedical applications with MR imaging. Before these nanoparticles can be used in biological applications, however, means are needed to make the nanoparticles soluble in aqueous solutions and the toxicity of these nanoparticles needs to be studied. We have developed two methods to surface modify and transfer these nanoparticles to the aqueous phase using the biocompatible co-polymer, Pluronic F127. Cytotoxicity was found to be dependent on the coating procedure used. Nanoparticle effects on a cell-culture model were quantified using concurrent assaying: a lactate dehydrogenase assay to determine cytotoxicity and a 3-(4,5-dimethylthiazol-2-yl)-5-(3-carboxymethoxyphenyl)-2-(4-sulfophenyl)-2H-tetrazolium, inner salt assay to determine viability for a 24 h incubation period. Concurrent assaying was done to insure that nanoparticles did not interfere with the colorimetric assay results. This report demonstrates that a monodispersion of nanoparticles of uniform size and shape can be manufactured. Initial cytotoxicity testing of new molecular imaging agents needs to be carefully constructed to avoid interference and erroneous results.