Nanocrystals of magnetite (Fe3O4) were prepared by alkaline precipitation. The precursor used for synthesis was ferrous chloride only and the reaction was carried out in absence of any oxidant. The synthesized pure phase magnetic nanoparticles (MNPs) were coated with a biocompatible polymer, chitosan (CS). FTIR and TGA confirm coating of CS on MNPs. Both bare and coated MNPs (Fe3O4 and CS-Fe3O4) show particle size 21.8 +/- 5.3 and 15.1 +/- 5.0 nm respectively. The magnetization values of both the MNPs are 51.68 and 49.96 emu/g at room temperature respectively. Negligible Coercivity and Remenance values at room temperature imply superparamagnetic behavior of the MNPs. The MNPs are studied for their induction heating abilities at 167.6, 251.4 and 335.2 Oe (equivalent to 13.3, 20.0 and 26.7 kA m(-1) respectively), in order to use them in magnetic fluid hyperthermia therapy. At 335.2 Oe, CS coated nanoparticles (NPs) show maximum SAR of 118.85 W/g, while bare NPs show SAR of 79.32 W/g. Low cytotoxic effects of both the MNPs on L929 cell line proved their suitability for in vivo applications. -NH2 group rendered by CS can further be used for conjugation of biomolecules to make them suitable candidates for biosensing and targeted drug delivery. (C) 2013 Elsevier B.V. All rights reserved.