A new magnetically recoverable nanocatalyst was prepared by coating magnetite with niobium oxide (Fe3O4@Nb2O5) by using a simple wet impregnation method. The Fe3O4@Nb2O5 nanocatalyst was fully characterized, and its catalytic activity was evaluated by using the one-pot, three-component Biginelli reaction, with the aim to synthesize 1,4-dihydropyrimidinones, a class of compounds with diverse pharmacological properties. The developed protocol was applied to a wide range of aliphatic and aromatic substrates, and structurally diverse products were obtained in excellent yields. Compared with copper and nickel nanocatalysts, the Fe3O4@Nb2O5 nanocatalyst demonstrated superior catalytic activity at a remarkably low catalyst loading (0.1 mol %). This niobium nanocatalyst could be easily separated from the reaction mixture with an external magnet and was reused several times without any loss of its catalytic activity. Moreover, although the Biginelli reaction is a century-old reaction, its mechanism is still a controversial subject, and our investigation provided an insight into the reaction mechanism.