Superparamagnetic iron oxide nanoparticles of size *5 nm surface functionalized with ascorbic acid (vitamin C) form a stable dispersion in water with a hydrodynamic size of *30 nm. The anti-oxidant property of ascorbic acid is retained after capping, as evidenced from the capability of converting methylene blue to its reduced leuco form. NMR relaxivity studies show that the ascorbic-acid-coated superparamagnetic iron oxide aqueous nanofluid is suitable as a contrast enhancement agent for MRI applications, coupled with the excellent biocompatibility and medicinal values of ascorbic acid.