The paper describes the results of optimization of magnetic response for highly stable bio-functionalize magnetic nanoparticles dispersion. Concentration of gelatin during in situ co-precipitation synthesis was varied from 8, 23 and 48 mg/mL to optimize magnetic properties. This variation results in a change in crystallite size from 10.3 to 7.8 ± 0.1 nm. TEM measurement of G3 sample shows highly crystalline spherical nanoparticles with a mean diameter of 7.2 ± 0.2 nm and diameter distribution (σ) of 0.27. FTIR spectra shows a shift of 22 cm(-1) at C=O stretching with absence of N-H stretching confirming the chemical binding of gelatin on magnetic nanoparticles. The concept of lone pair electron of the amide group explains the mechanism of binding. TGA shows 32.8-25.2% weight loss at 350 °C temperature substantiating decomposition of chemically bind gelatin. The magnetic response shows that for 8 mg/mL concentration of gelatin, the initial susceptibility and saturation magnetization is the maximum. The cytotoxicity of G3 sample was assessed in Normal Rat Kidney Epithelial Cells (NRK Line) by MTT assay. Results show an increase in viability for all concentrations, the indicative probability of a stimulating action of these particles in the nontoxic range. This shows the potential of this technique for biological applications as the coated particles are (i) superparamagnetic (ii) highly stable in physiological media (iii) possibility of attaching other drug with free functional group of gelatin and (iv) non-toxic.