We have functionalized amorphous Fe2O3 nanoparticle s with alkane sulfonic and octadecanephosphonic acids. TEM reveals nanoparticles 5-10 nm in diameter. FTIR spectra suggest that while in all cases the alkyl chains are packed in a solid-like arrangement, packing disorder increased with decreasing chain length. TGA of the sulfonic acid-functionalized Fe2O3 nanoparticles shows that moieties started to decompose and desorb from the iron oxide surface at about 260 degrees C. In the case of the octadecanephosphonic acid (OPA)-functionalized Fe2O3, moieties started to decompose and desorb at 340 degrees C. It is suggested that free Fe-OH groups can serve as proton donors to assist in the sulfonic acid desorption process and that because of the diprotic nature of the phosphonic acid these free surface Fe-OH groups may no longer be available. Among all, the octadecanesulfonic acid coating displays the lowest magnetization, which may be explained by the high packing and ordering of the alkyl chains on the particle surface. The saturation curve of the OPA case gives the smallest value of magnetization we have ever measured for functionalized Fe2O3 nanoparticles. It is suggested that the spin state of surface Fe3+ ions is affected by the bonded surfactant, through a mechanism of p pi-d pi P-O, and d pi-d pi Fe-P interactions and that the phosphonate empty d orbitals increase magnetic interactions between neighboring Fe3+ spins.