Iron oxide nanoparticles, due to their magnetic properties, are versatile tools for biomedical applications serving both diagnostic and therapeutic roles. Their performance is intricately intertwined with their fate in the demanding biological environment. Once inside cells, these nanoparticles can be degraded, implying a loss of magnetic efficacy, but also transformed into neo‐synthesized magnetic nanoparticles, potentially restoring functionality. This study aims to delineate biological features governing these processes. Magnetic nanoparticles are internalized in human mesenchymal stem cells (hMSCs), and their biotransformations are investigated from nano‐ to micro‐scale using electron microscopy (STEM‐HAADF, HRTEM, SAED), a benchtop magnetic sensor, and fine structural characterizations (synchrotron XRD, VSM). Results evidence a delicate equilibrium between the biodegradation and biosynthesis of magnetic nanoparticles, with biotransformation kinetics depending on cell density at magnetic labeling and on spatial cell configuration (monolayers vs spheroids). The biotransformed nanoparticles, composed of magnetite or maghemite, are localized within endosomal/lysosomal compartments and associated with the recruitment of ferritin proteins.