Magnetic iron oxide nanoparticles synthesized by coprecipitation and thermal decomposition yield largely monodisperse size distributions. The diameters of the coprecipitated particles measured by X-ray diffraction and transmission electron microscopy are between approximately 9 and 15 nm, whereas the diameters of thermally decomposed particles are in the range of 8 to 10 nm. Coprecipitated particles are indexed as magnetite-rich and thermally decomposed particles as maghemite-rich; however, both methods produce a mixture of magnetite and maghemite. Fourier transform IR spectra reveal that the nanoparticles are coated with at least two layers of oleic acid (OA) surfactant. The inner layer is postulated to be chemically adsorbed on the nanoparticle surface whereas the rest of the OA is physically adsorbed, as indicated by carboxyl OH stretching modes above 3400 cm−1. Differential thermal analysis (DTA) results indicate a double-stepped weight loss process, the lower-temperature step of which is assigned to condensation due to physically adsorbed or low-energy bonded OA moieties. Density functional calculations of Fe–O clusters, the inverse spinel cell, and isolated OA, as well as OA in bidentate linkage with ferrous and ferric atoms, suggest that the higher-temperature DTA stage could be further broken down into two regions: one in which condensation is due ferrous/ferrous– and/or ferrous/ferric–OA and the other due to condensation from ferrous/ferric– and ferric/ferric–OA complexes. The latter appear to form bonds with the OA carbonyl group of energy up to fivefold that of the bond formed by the ferrous/ferrous pairs. Molecular orbital populations indicate that such increased stability of the ferric/ferric pair is due to the contribution of the low-lying Fe3+ t2g states into four bonding orbitals between −0.623 and −0.410 a.u.