Nowadays, magnetic nanoparticles play a key role in drug treatment. However, if they are uncoated, they might aggregate and cause embolism in drug delivery. To avoid this, they are generally coated with polymers. In this investigation, magnetic nanoparticles (MNPs) were coated with chitosan through in situ co-precipitation process and their properties in addition to their cytotoxicity in MCF7 and fibroblast cells were analyzed. The results showed MNPs–chitosan nanoparticles would contain an average mean diameter of 32 nm and a saturation magnetization (MS) value of 38.87 emu/g. To characterize the synthesized nanoparticles in terms of structural, morphological and magnetic properties, Fourier transform infrared (FTIR), X-ray diffraction (XRD), scanning electron microscopy (SEM), transmission electron microscopy (TEM), thermal gravimetric analysis (TGA) and vibrating sample magnetometry (VSM) studies were used. Toxicity test was also done to investigate whether their presence would cause any toxicity in the body; in addition, antibacterial assay was done to analyze if nanoparticles could be used as an antimicrobial agent.