Montmorillonite clay and agar are naturally occurring materials of significant importance in designing biocompatible materials tailored for applications in biotechnology and medicine. The introduction of magnetic properties has the potential to significantly boost their characteristics and expand their applications. In this study, we have successfully synthesized highly intercalated magnetic composites, incorporating magnetic iron oxide nanoparticles (MNPs), montmorillonite clay (MMT), and agar (AG), through a thermo-physicomechanical method. Three samples of MMT-AG with 2, 1.5, and 0.5% MNPs and three sample composites of MNPs-AG with 2, 1, and 0.5% MMT clay are prepared. The synthesized composites were characterized by SEM, XRD, TGA, DTA, and FTIR. SEM analysis revealed a uniform dispersion of MNPs and MMT in the composite. The XRD pattern confirmed the presence of MNPs in the composite site. The TGA and DTA results demonstrated improved thermal stability due to the MNP incorporation. FTIR spectra showed all of the constituents of agar, MNPs, and MMT clay. The swelling ratio was observed to range from 835% to 1739%. The swelling study indicated an increased hydrophobicity with the addition of MNPs to the composite. Antibacterial activities revealed a significant inhibition of Escherichia coli (E. coli) growth by ranging from 10 to 19 nm in the composite. The composite also exhibited a considerable antioxidant action, with IC50 values of 7.96, 46.55, and 57.58 μg/mL, and electrical properties just like conductors.