Iron oxide nanoparticles were coated with the biocompatible, biodegradable, non-immunogenic polysaccharide inulin by introduction of carboxyl groups into the inulin structure and conjugation with amine groups on the surface of iron oxide nanoparticles grafted with 3-aminopropyltriethoxysilane. The resulting nanoparticles were characterized by FT-IR spectroscopy, transmission electron microscopy, dynamic light scattering, zeta potential, SQUID magnetometry, and with respect to their energy dissipation rate in applied alternating magnetic fields. The nanoparticles had a hydrodynamic diameter in the range of 70 ± 10 nm and were superparamagnetic, with energy dissipation rates in the range of 58–175 W/g for an applied field frequency of 233 kHz and an applied field amplitude in the range of 20–48 kA/m. The nanoparticles were stable in a range of pH, at temperatures between 23°C and 53°C, and in short term storage in water, PBS, and culture media. The particles were non-cytotoxic to the immortalized human cancer cell lines Hey A8 FDR, A2780, MDA 468, MCF-7 and Caco-2. The nanoparticles were readily taken up by Caco-2 cells in a time and concentration dependent fashion, and were found to have a pharmacokinetic time constant of 47 ± 3 min. The small size, non-cytotoxicity, and efficient energy dissipation of the particles could make them useful for biomedical applications such as magnetic fluid hyperthermia.