Novel biocompatible polymer immobilized superparamagnetic nanoparticles (MNP) are prepared by grafting four armed pentaerythritol poly(epsilon-polycaprolactone) (PE-PCL) onto silane modified MNP. The MNPs are synthesized by hydrothermal process and its modification using (3-aminopropyl)trimethoxysilane (TMAS) coating is done by the sol gel technique. The pentaerythritol (PE) initiated ring-opening polymerization (ROP) is carried out to prepare four armed PE-PCL. The reaction is shown to follow first order kinetics. The structure of PE-PCL is confirmed by NMR spectrum and MALDI-TOF analysis. The in situ grafting of PE-PCL onto modified MNP has been carried out by using 4,4'-methylenediphenyl diisocyanate (MDI) as an intermediate linker. The grafting density as determined by TGA analysis has been found to be significantly higher than previously reported linear PCL grafted MNPs in the literature. This leads to uniform dispersion of grafted MNPs which still is a challenging task in contemporary research. The effective dispersion of MNP into PE-PCL matrix is analyzed by HRTEM. The saturation magnetization of the PE-PCL grafted MNPs is significantly high and this can be tailored further by varying the grafting density. The biocompatibility of polymer grafted nanoparticles is confirmed by MTT assay using HeLa cell line. The superparamagnetic and biocompatible novel PE-PCL grafted MNP so prepared would have manifold potential applications including in therapy and targeted drug delivery.