Magnetic nanoparticles have been used extensively as drug delivery materials in recent years [1,2]. The present research goal is to treat bone diseases (such as osteoporosis and infection) by using surface modified magnetic nanoparticles. Magnetite (Fe3O4) and maghemite (Fe2O3) were synthesized and coated with calcium phosphate (CaP). The resulting nanoparticles were treated hydrothermally to change the crystalline properties of CaP. Nanoparticles were characterized via transmission electron microscopy (TEM) and vibrating sample magnetometry (VSM). TEM was also used to study the uptake of nanoparticles into osteoblasts (OB) and bacteria. OB proliferation experiments were conducted after 1, 3 and 5 days in the presence of the various iron oxide nanoparticles alone and CaP coated iron oxide magnetic nanoparticles. OB proliferation experiments were also conducted after 1, 3 and 5 days in the presence of various concentrations of CaP coated nanoparticles to examine a possible concentration dependent trend on OB density. Staph epidermidis were incubated with different doses of Fe3O4 to determine the effect of these nanoparticles on bacteria activity. Results of this in vitro study demonstrated greater OB functions and inhibited bacteria functions in the presence of select magnetic nanoparticles. In summary, the results of this study showed that magnetic nanoparticles should be further studied for various orthopedic applications.