Concurrent sonolysis of iron pentacarbonyl and poly(ethylene glycol)-400 (PEG-400) in hexadecane solvent proceeds via zero-order kinetics and results in Fe nanoparticles encapsulated in PEG-400 (Fe-PEG). The transmission electron microscopy images show Fe-PEG consisting of <3 nm Fe particles that are evenly dispersed in the PEG matrix. Mossbauer and X-ray absorption fine structure/X-ray absorption near-edge structure data reveal an ordered PEG assembly that helps protect the zerovalent Fe core. The Fe nanoparticles in Fe-PEG are superparamagnetic with a magnetization value of 45 emu/g-Fe at 10 KOe. The rheology of the synthesized material shows an unusual increase in viscosity with temperature that is likely due to lower critical saturation temperature phase segregation over 40 degreesC. The low-temperature mobility of the PEG-400 moiety in Fe-PEG would allow facile ligation of the Fe-0 core with biologically and chemically active groups.