Nanoparticles of iron oxide were prepared by subjecting iron chloride powder to (w/o) microemulsions consisting of sodium bis(2-ethylhexyl) sulfosuccinate (AOT), isooctane and water. FeCl3 was first dissolved in the water pools of the microemulsion, and then reacted with NaOH added as an aqueous solution to form iron oxide. The amount of NaOH solution was limited so that single microemulsion phase is obtained. This technique serves as an in-situ nanoparticle preparation technique aimed at minimizing particle aggregation associated with particle transportation to required sites. In this study, the effects of AOT concentration and water to AOT mole ratio on the nanoparticle size were investigated. UV/Vis spectrophotometry and transmission electron microscopy (TEM) were used to measure the particle size distribution.