Superparamagnetic iron oxide nanoparticles are well known for biomedical applications. The particle size, morphology, surface area, and functionalization are the key parameters that affect their bioactivity properties. Inline to this, the superparamagnetic Fe3O4 nanoparticles were prepared via chemical coprecipitation method with an average particle size of 6 ± 3 nm. The particles were surface-functionalized with chitosan and in-house prepared reduced graphene oxide (rGO) to obtain chitosan-coated Fe3O4 nanoparticles (C-Fe3O4) and rGO-Fe3O4 nanocomposites (G-Fe3O4), respectively. Upon functionalization, the physicochemical properties of the materials were characterized thoroughly using X-ray diffraction, transmission electron microscopy, vibrating sample magnetometer, Raman Spectroscopy, and thermal gravimetric analysis. Furthermore, they have subjected to cytotoxicity assay, agar two-fold broth dilution test, and disc diffusion assay experiments for the determination of cytotoxicity and antibacterial activities. The effect of surface functionalization on their bioactivity was investigated thoroughly. The surface functionalization with chitosan and rGO has enhanced the bioactivity of the Fe3O4 nanoparticles.