Magnetic N-benzyl-O-carboxymethylchitosan nanoparticles were synthesized through incorporation and in situ methods and characterized by Fourier transform infrared spectroscopy, X-ray diffraction, differential scanning calorimetry, and magnetization measurements. Indomethacin was incorporated into the nanoparticles via the solvent evaporation method. The indomethacin-loaded magnetic nanoparticles were characterized by the same techniques, and also by transmission electron microscopy. The nanoparticles containing the polymer showed a drug loading efficiency of between 60.8% and 74.8%, and the magnetic properties were not significantly affected by incorporation of the drug. The in vitro drug release study was carried out in simulated body fluid, pH 7.4 at 37°C. The profiles showed an initial fast release, which became slower as time progressed. The percentage of drug released after 5 h was between 60% and 90%, and the best fitting mathematical model for drug release was the Korsmeyer-Peppas model, indicating a Fickian diffusion mechanism.