Nanosized magnetite (Fe3O4) particles showing superparamagnetism at room temperature have been prepared by controlled coprecipitation of Fe2+ and Fe3+ in presence of highly hydrophilic poly(vinylalcohol phosphate)(PVAP). The impact of polymer concentration on particle size, size distribution, colloidal stability, and magnetic property has been extensively studied. The aqueous suspension of magnetite, prepared using 1% PVAP solution is stable for four weeks at pH 5–8. X-ray diffractograms show the formation of nanocrystalline inverse spinel phase magnetite. Transmission Electron Microscopy confirmed well dispersed cubic magnetite particles of size of about 5.8 nm. Dynamic Light Scattering measurement shows narrow distribution of hydrodynamic size of particle aggregates. Infrared spectra of samples show strong Fe—O—P bond on the oxide surface. UV-visible studies show aqueous dispersion of magnetite formed by using 1% PVAP solution is stable at least for four weeks without any detoriation of particle size. Magnetization measurements at room temperature show superparamagnetic nature of polymer coated magnetite nanoparticles.