Hollow silica microspheres encapsulating ferromagnetic iron oxide nanoparticles were synthesized by a surfactant-aided aerosol process and subsequent treatment. The cationic surfactant cetyltrimethyl ammonium bromide (CTAB) played an essential role in directing the structure of the composite. Translation from mesoporous silica particles to hollow particles was a consequence of increased loading of ferric species in the precursor solution and the competitive partitioning of CTAB between silicate and ferric colloids. The hypothesis was that CTAB preferentially adsorbed onto more positively charged ferric colloids under acidic conditions. At a critical Fe/Si ratio, most of the CTAB was adsorbed onto ferric colloids and coagulated the colloids to form larger clusters. During the aerosol process, a silica shell was first formed due to the preferred silicate condensation on the gas-liquid interface of the aerosol droplet. Subsequent drying concentrated the ferric clusters inside the silica shell and resulted in a silica shell/ferric core particle. Thermal treatment of the core shell particle led to encapsulation of a single iron oxide nanoparticle inside each silica hollow microsphere.