Because of their high magnetization and suitable biocompatibility, iron-oxide nanoparticles (IONPs) have been widely employed in various biomedical applications, including magnetic hyperthermia for cancer treatment. In many cases, the colloidal stability requirement will limit the usage of ferromagnetic particles that are usually associated with good magnetic response. To address this challenge, a stable carrier for better colloidal stability regardless of the size or shape of the IONPs while at the same time providing enhanced magnetic hyperthermia heating performance is required. In this work, IONPs of different sizes (4, 8, 20, 45, and 250 nm) were engineered to reside in the graphene oxide (GO) sheet carrier, which were stable in aqueous solution even in the presence of a strong magnetic field. Out of various IONPs sizes, highest specific absorption rate (SAR) value of 5020 W g was obtained with 45 nm GO-IONPs nanocomposites at a frequency and alternating magnetic field of 400 kHz and 32.5 kA m, respectively. The calculated intrinsic loss power (ILP) was 12.21 nH m kg, which is one of the highest ILP values reported for synthesized IONPs to the best of our knowledge. To enhance the excellent colloidal stability in biological environment, the GO-IONPs nanocomposites can be further grafted with polyethylene glycol (PEG) because agglomeration of pristine GO sheets occurs because of adsorption of cations. High ILP values could be well maintained even after PEG coating. The PEGylated 45 nm GO-IONP showed excellent antitumor efficacy in 4T1-tumor model mice by inhibiting tumor progression within a safe dosage range. Overall, the novel nanocomposite in this work-PEG-GO-IONP-possesses high hyperthermia performance, excellent colloidal stability in biological environment, and availability of functional groups in GO and can be utilized for tagging in various biomedical applications.