Unilamellar vesicles, formed spontaneously by mixing single-tailed anionic and cationic surfactants (dodecylbenzenesulfonic acid (HDBS) and cetyltrimethylammonium bromide (CTAB), respectively), have been used as reactors for the synthesis of magnetic nanoparticles. The micellar cationic surfactant solution containing ferrous chloride was mixed with the micellar anionic surfactant solution, resulting in the formation of defect-free unilamellar vesicles, with ferrous chloride within the cores as well as in the extravesicular spaces. The external ferrous ions were replaced with sodium ions by gel permeation chromatography. Sodium hydroxide was then added to the extravesicular region. Hydroxyl ions penetrated the vesicle cores and reacted with the available ferrous ions to initiate particle formation. The presence of intravesicular particles was confirmed by cryogenic transmission electron microscopy. Absorbance measurement showed that the reaction proceeded over a period of several minutes. To form the magnetic nanoparticles, the suspension was heated to about 70 degrees C for 1 min, and then cooled back toroom temperature. The resulting particles had a mean diameter of approximately 2.6 nm and displayed superparamagnetic behavior. Wide-area electron diffraction showed the particles to be either gamma-ferrite or magnetite. Magnetization measurements yielded a least upper bound for the magnetic diameter of these particles of 0.61 nm. These results are consistent with the presence of a magnetically disordered surface layer on the order of 1 nm thick.