The most commonly used imaging modality and a non-invasive tool for cancer diagnosisCancer diagnosis and imaging is magnetic resonance imagingMagnetic Resonance Imaging (MRI) (MRI). Contrast agents (CAs) create tissue contrast by magnifying the longitudinal (T1) and transverse (T2) relaxation rates. The use of iron oxide nanoparticles (IONP) as contrast agents for MRI is a better alternative than using gadolinium-based contrast agents due to the problem of toxicity. Iron oxide nanoparticles are less toxic and more cytocompatible and posses’ unique characteristics such as magnetic properties. The unique size and modifications made on IONP makes it an excellent contrast agent for MRI. The designing of IONP plays the most crucial role in determining the efficiency and biocompatibility. Various modifications such as surface coating and attaching biomolecules modify the size and biodistribution, which eventually aids in target tissue accumulation and efficient imaging. This chapter deals with efficient and smart designing methods which make the IONP highly biocompatible. Various biocompatibility testing methods and how IONP behaves in physiological environment are also discussed. The biodegradation or clearance from the body is also very important when considering the designing of IONP. Depending on the size and coating applied to IONP, the fate of the particle is determined. This chapter also explains the biodegradation route of the iron oxide nanoparticles when administered in vivo.