Multicomponent oxide powders with nominal compositions of (45-x)·SiO2·24.5CaO·24.5Na2O·6P2O5xFe2O3 (in wt.%) were prepared by a modified sol-gel procedure. X-ray diffraction (XRD) patterns and high resolution transmission electron microscope images of the sol-gel products show fully amorphous structure for Fe2O3 substitutions up to 2 wt.%. Sol-gel derived 43SiO2·24.5CaO·24.5Na2O·6P2O5·2Fe2O3 glass (or bioglass 45S5 with SiO2 substituted with 2 wt.% Fe2O3), exhibited magnetic behavior with a coercive field of 21 Oe, hysteresis loop area of 33.25 erg/g and saturation magnetization of 0.66 emu/g at an applied field of 15 kOe at room temperature. XRD pattern of this glass annealed at 850 °C for 1h revealed the formation of a glass-ceramic containing sodium calcium silicate and magnetite phases in nanocrystalline form. Temperature dependent magnetization and room temperature electron spin resonance data have been used to obtain information on the magnetic phase and distribution of iron ions in the sol-gel glass and glass-ceramic samples. Sol-gel derived glass and glass-ceramic exhibit in-vitro bioactivity by forming a hydroxyapatite surface layer under simulated physiological conditions and their bio-response is superior to their melt quenched bulk counterparts. This new form of magnetic bioglass and bioglass ceramics opens up new and more effective biomedical applications.