Synthesis of highly crystalline and monodisperse iron oxide nanoparticles is reported. The separation of Fe centers through site-specific binding to a polysaccharide-alginate matrix enables the generation of particles with a monodisperse or narrow size distribution character, resulting in transparent pigments. Site-specific interactions coupled with gel like character of alginate is proposed as the mechanism behind generation of lower particle sizes. Alginate-Fe complexes developed were subjected to heat treatment to provide for crystalline character and development of hematite (alpha-Fe2O3). Conditions most ideal for achieving monodispersity and lower sizes have been optimized and confirmed through microscopic and photon correlation spectroscopic measurements. (C) 2006 Elsevier Ltd. All rights reserved.