Context: The coating material of magnetic nanoparticles plays a great role in drug delivery application. The coatings not only increase the stability of the nanoparticles but also improve the drug release pattern, biocompatibility and mucoadhesivity. Objective: Montmorillonite (MMT) containing magnetic iron oxide nanoparticles coated with polyelectrolyte complex (PEC) of carboxymethyl starch-chitosan were prepared for controlled release applications. Method: The PEC-coated nanoparticles were characterised by Fourier Transmission Infra-red spectroscopy and X-ray diffraction, scanning electron microscope, transmission electron microscope, and dynamic light scattering. Cytotoxicity study was performed by MTT assay analysis. Mucoadhesivity test was performed by using in vitro wash off and ex vivo method. Result: The coating of PEC showed good stability, biocompatibility and mucoadhesivity of the iron oxide magnetic nanoparticles. MMT addition enhanced the swelling, drug loading and release and also the cytotoxicity and mucoadhesivity of the nanoparticles. Conclusion: This study revealed that the MMT incorporated PEC of CMS-CS can be effectively used for coating of iron oxide nanoparticles.