Magnetic nanoparticles can be used for a variety of biomedical applications. They can be used in the targeted delivery of therapeutic agents in vivo, in the hyperthermic treatment of cancers, in magnetic resonance (MR) imaging as contrast agents and in the biomagnetic separations of biomolecules. In this study, a characterization of the movement and heating of three different types of magnetic nanoparticles in physiological systems in vitro is made in a known external magnetic field and alternating field respectively. Infra-red (IR) imaging and MR imaging were used to visualize these nanoparticles in vitro. A strong dependence on the size and the suspending medium is observed on the movement and heating of these nanoparticles. First, two of the particles (mean diameter d = 10 nm, uncoated Fe₃O₄ and d = 2.8 µm, polystyrene coated Fe₃O₄+γ-Fe₂O₃) did not move while only a dextran coated nanoparticle (d = 50 nm, γ-Fe₂O₃) moved in type 1 collagen used as an in vitro model system. It is also observed that the time taken by a collection of these nanoparticles to move even a smaller distance (5 mm) in collagen (~100 min) is almost ten times higher when compared to the time taken to move twice the distance (10 mm) in glycerol (~10 min) under the same external field. Second, the amount of temperature rise increases with the concentration of nanoparticles regardless of the microenvironments in the heating studies. However, the amount of heating in collagen (maximum change in temperature ΔT_max~9 °C at 1.9 mg Fe ml⁻¹ and 19 °C at 3.7 mg Fe ml⁻¹) is significantly less than that in water (ΔT_max~15 °C at 1.9 mg Fe ml⁻¹ and 33 °C at 3.7 mg Fe ml⁻¹) and glycerol (ΔT_max~13.5 °C at 1.9 mg Fe ml⁻¹ and 30 °C at 3.7 mg Fe ml⁻¹). Further, IR imaging provides at least a ten times improvement in the range of imaging magnetic nanoparticles, whereby a concentration of (0–4 mg Fe ml⁻¹) could bevisualized as compared to (0–0.4 mg Fe ml⁻¹) by MR imaging. Based on these in vitro studies, important issues and parameters that require further understanding and characterization of these nanoparticles in vivo are discussed.