A novel interfacially active and magnetically responsive nanoparticle is designed and prepared by direct grafting of bromoesterified ethyl cellulose (EC-Br) onto the surface of amino-functionalized magnetite (Fe3O4) nanoparticles. Due to its strong interfacial activity, ethyl cellulose (EC) on the magnetic nanoparticles enables the EC-grafted Fe3O4 (M-EC) nanoparticles to be interfacially active. The grafting of interfacially active polymer EC on magnetic nanoparticles is confirmed by zeta-potential measurements, diffuse reflectance infrared Fourier-transform spectroscopic (DRIFTS) characterization, and thermogravimetric analysis (TGA). Scanning electron microscopy (SEM) images show a negligible increase in particle size, confirming the thin silica coating and grafted EC layer. The magnetization measurements show a marginal reduction in saturation magnetization by silica coating and EC grafting of original magnetic nanoparticles, confirming the presence of coatings. The M-EC nanoparticles prepared in this study show excellent interfacial activity and highly ordered features at the oil/water interface, as confirmed using the LangmuirBlodgett technique and atomic force microscopy (AFM). The magnetic properties of M-EC nanoparticles at the oil/water interface make the interfacial properties tunable by or responsive to an external magnetic field. The occupancy of M-EC at the oil/water interface allows rapid separation of the water droplets from emulsions by an external magnetic field, demonstrating enhanced coalescence of magnetically tagged stable water droplets and a reduced overall volume fraction of the sludge.