Highly hydrophilic magnetic nanoparticles have been molecularly designed. For the first time, the application of highly water-soluble magnetic nanoparticles as novel draw solutes in forward osmosis (FO) was systematically investigated. Magnetic nanoparticles functionalized by various groups were synthesized to explore the correlation between the surface chemistry of magnetic nanoparticles and the achieved osmolality. We verified that magnetic nanoparticles capped with polyacrylic acid can yield the highest driving force and subsequently highest water flux among others. The used magnetic nanoparticles can be captured by the magnetic field and recycled back into the stream as draw solutes in the FO process. In addition, magnetic nanoparticles of different diameters were also synthesized to study the effect of particles size on FO performance. We demonstrate that the engineering of surface hydrophilicity and magnetic nanoparticle size is crucial in the application of nanoparticles as draw solutes in FO. It is believed that magnetic nanoparticles will soon be extensively used in this area.