Fe@Au core–shell nanoparticles (NPs) exhibit multiple functionalities enabling their effective use in applications such as medical imaging and drug delivery. In this work, a novel synthetic method was developed and optimized for the synthesis of highly stable, monodisperse Fe@Au NPs of average diameter ∼24 nm exhibiting magneto-plasmonic characteristics. Fe@Au NPs were characterized by a wide range of experimental techniques, including scanning (transmission) electron microscopy (S(T)EM), X-ray diffraction (XRD), X-ray photoelectron spectroscopy (XPS), energy dispersive X-ray spectroscopy (EDX), dynamic light scattering (DLS) and UV–vis spectroscopy. The formed particles comprise an amorphous iron core with a crystalline Au shell of tunable thickness, and retain the superparamagnetic properties at room temperature after formation of a crystalline Au shell. After surface modification, PEGylated Fe@Au NPs were used for in vitro studies on olfactory ensheathing cells (OECs) and human neural stem cells (hNSCs). No adverse effects of the Fe@Au particles were observed post-labeling, both cell types retaining normal morphology, viability, proliferation, and motility. It can be concluded that no appreciable toxic effects on both cell types, coupled with multifunctionality and chemical stability make them ideal candidates for therapeutic as well as diagnostic applications.