We studied the preparation of surface modified magnetic nanoparticles using poly(ethylene glycol) (PEG) covalently attached to the particle surface using carbodiimide chemistry, preventing polymer de-sorption in subsequent applications. In this method, particles are synthesized by thermal decomposition using oleic acid as surfactant that is later exchanged by 3-aminopropyl trimethoxysilane (APS) to render particles with reactive amine groups (-NH2) on their surface. Amines are then reacted with carboxyl groups (-COOH) in mono carboxyl mPEG of different molecular weights using 1-ethyl-3-(3-dimethylaminopropyl) carbodiimide hydrochloride (EDC) and N-hydroxysuccinimide (NHS) in water. mPEG-COOH of various molecular weights were obtained by converting the hydroxyl end group in methoxy-PEG into carboxylic acids. Particle size was characterized by Dynamic Light Scattering (DLS), SQUID magnetic measurements, and Transmission Electron Microscopy (TEM). Stability of functionalized particles in water was studied as a function of pH and ionic strength using Zeta Potential Measurements. DLVO theory was used to study the stability of the particles considering the different interparticle forces that affect the stability of the particles. The method produces highly stable suspensions of magnetic nanoparticles in water based systems with tunable hydrodynamic diameters that make them suitable for biomedical applications such as magnetic fluid hyperthermia and magnetic resonance imaging.