Tailoring the surface of nanoparticles is essential for biological applications of magnetic nanoparticles. FePt nanoparticles are interesting candidates owing to their high magnetic moment. Established procedures to make FePt nanoparticles use oleic acid and oleylamine as the surfactants, which make them dispersed in nonpolar solvents such as hexane. As a model study to demonstrate the modification of the surface chemistry, stable aqueous dispersions of FePt nanoparticles were synthesized after ligand exchange with mercaptoalkanoic acids. This report focuses on understanding the surface chemistry of FePt upon ligand exchange with mercapto compounds by conducting X-ray photoelectron spectroscopy (XPS) and Fourier transform infrared spectroscopy (FTIR) studies. It was found that the mercapto end displaces oleylamine on the Pt atoms and the carboxylic acid end displaces the oleic acid on the Fe atoms, thus exposing carboxylate and thiolate groups on the surface that provide the necessary electrostatic repulsion to form stable aqueous dispersions of FePt nanoparticles.