In the present work, Mg0.5Ni0.5Fe2O4 nanopowders were prepared by a sol-gel combustion method. The magnetic properties, heat generation ability in an AC magnetic field and cytotoxicity of the mixed ferrite nanopowders were investigated. The results showed that the powders have crystalline spinel structure with a particle size in the range of 20-90 nm. Maximum saturation magnetization (Ms) of 51 emu/g was obtained for the Mg0.5Ni0.5Fe2O4 nanoparticles calcined at 900 degrees C. The results showed that, the coercivity (Hc) of the Mg0.5Ni0.5Fe2O4 initially increases up to 700 degrees C and then decreases with increasing temperature, whereas the Ms of the samples continuously increases. The Mg0.5Ni0.5Fe2O4 sample exhibited a temperature increase up to 45 degrees C during 10 minutes in the exposure of magnetic field of 200 Oe. By increasing the viscosity of ferrofluid, the heat generation ability of nanoparticles reduced up to 9% at magnetic field of 200 Oe. Cell compatibility of the ferrite powders was studied by MTT assay using MG63 cell line proliferation. MTT results showed that calcination temperature of the Mg0.5Ni0.5Fe2O4 nanoparticles significantly affects the cell compatibility.