Hepatocellular carcinoma (HCC), the fifth most prevalent cancer worldwide, is influenced by a myriad of clinic-pathological factors, including viral infections and genetic abnormalities. This study delineates the synthesis, characterization, and the biological efficacy of iron oxide nanoparticles (FeO) and chitosan-coated iron oxide nanoparticles (FeO-CS) against HCC. Analytical methods confirmed the successful synthesis of both nanoparticles, with FeO-CS demonstrating a smaller, uniform spherical morphology and distinct surface and magnetic properties attributable to its chitosan coating. The prepared materials were analyzed using various techniques, and their potential cytotoxic effects on HepG2 cancer cells line for HCC were investigated. In biological evaluations against HepG2 cells, a notable distinction in cytotoxicity was observed. FeO showed modest anticancer activity with an IC50 of 383.71 ± 23.9 µg/mL, whereas FeO exhibited a significantly enhanced cytotoxic effect, with a much lower IC50 of 39.15 ± 39.2 µg/mL. The Comet assay further evidenced FeO-CS potent DNA damaging effect, showcasing its superior ability to induce apoptosis through extensive DNA fragmentation. Biochemical analyses integrated into our results reveal that FeO-CS not only induces significant DNA damage but also markedly alters oxidative stress markers. Compared to control and FeO-treated cells, FeO-CS exposure significantly elevated levels of oxidative stress markers: superoxide dismutase (SOD) increased to 192.07 U/ml, catalase (CAT) decreased to 0.03 U/L, glutathione peroxidase (GPx) rose dramatically to 18.76 U/gT, and malondialdehyde (MDA) levels heightened to 30.33 nmol/gT. These results underscore the potential of FeO-CS nanoparticles not only in inducing significant DNA damage conducive to cancer cell apoptosis but also in altering enzymatic activities and oxidative stress markers, suggesting a dual mechanism of action that may underpin their therapeutic advantage in cancer treatment. Our findings advocate for the further exploration of FeO-CS nanoparticles in the development of anticancer drugs, emphasizing their capability to trigger oxidative stress and enhance antioxidant defense mechanisms.