A biocompatible, reliable, and particularly versatile synthesis of magnetic iron oxide nanoparticles (IONPs) is presented that uses iron(III) acetylacetonate Fe(acac)3 as an iron precursor and sodium borohydride as a reducing agent. Both the reaction temperature and the concentration of the reducing agent have considerable effects on the IONP size. These dependencies can be used to prepare IONPs ranging in size from 5 to 8 nm, as determined by transmission electron microscopy (TEM). Synthesis at room temperature or with higher sodium borohydride concentrations always resulted in smaller particle sizes. Powder X-ray diffraction patterns show the presence of an iron oxide phase with a cubic unit cell and allow for the determination of the lattice parameters and average crystallite sizes for all synthesized IONPs. Transmission Mössbauer spectroscopy shows that the as-synthesized IONPs are pure magnetite (Fe3O4) and is further used to elucidate the reaction pathway by analyzing iron intermediates formed prior to nanoparticle formation and precipitation. TEM and high-resolution TEM reveal quasi-spherical shapes and lattice fringes for most IONPs. With only minor modifications of the synthesis procedure, this versatile, one-pot synthesis is proven to be suitable for the production of bare (uncoated) IONPs, IONPs with hydrophilic poly(ethylene glycol), L-arginine, and L-glutamic acid coatings, as well as IONPs with hydrophobic coatings such as oleic acid. All coated IONPs were characterized by FT-IR spectroscopy. In addition, the bare IONPs could easily be modified post-synthesis with a suitable capping agent using ultrasonication. To verify the biocompatibility of the IONPs, in vitro cytotoxicity studies were carried out on bare IONPs with intestinal (Caco2) and liver epithelial (HepG2) cell cultures using an 3-(4,5-dimethylthiazol-2-yl)-2,5-diphenyltetrazolium bromide assay. Phase contrast microscopy after hematoxylin-eosin staining showed the intact morphology of the Caco2 and HepG2 cells treated with IONPs.