Iron oxide (Fe2O3) bulk powder have been ablated/fragmented in different liquid medium by Nd:YAG laser beam using 1064 nm wavelength. Sodium dodecyl sulfate (SDS), cetyltrimethyl ammonium bromide ( CTAB) and double distilled water (DDW) are used as liquid medium. Crystalline size, lattice strain, phase and structure of ablated particles have been investigated using synchrotron X-ray diffraction. Optical band gap energy of as purchased Fe2O3 found 1.92 eV that increased to 2.03 eV after ablation in CTAB determined by UV-vis absorption spectroscopy. Magnetic properties have been analyzed by hysteresis loops using vibrating sample magnetometer (VSM). Crystalline sizes have been found in the range of 29.23-16.54 nm and coercivity tailored in the range of 206.91-298.36 Oe using laser ablation. Saturation magnetization and remanence have been found in the range of 0.013-3.41 emu/g and 0.0023-0.51 emu/g respectively. Particle shape and size have been examined by scanning electron microscopy (SEM). CTAB (cationic) and SDS (anionic) surfactants are used as capping agent. CTAB produces phase transformation in ablated iron oxide (Fe2O3). Crystallinity and crystalline size of ablated particles in DDW increased due to presence of rich oxygen in it due to oxidation. Ablated Fe2O3 nanoparticles have been widely used experimentally for numerous in vivo applications such as MRI contrast enhancement agent, tissue repair, immunoassay, detoxification of biological fluids, hyperthermia, drug delivery and cell separation. (C) 2013 Elsevier B.V. All rights reserved.