L-arginine capped and transition metal-doped Ultra-Small Iron Oxide Nanoparticles (USIONs) were synthesized by a wet chemical method. The nanoparticles (NPs) were encapsulated with Pluronic F127® and used as a vehicle (M2+/Fe3O4@L-Arg/P) to load anti-cancer drug. The interaction of ligand molecules with NPs surface was studied by FTIR spectroscopy, while the Vibrating Sample Magnetometry and Mössbauer spectroscopy were used for magnetic properties. In vitro, drug release kinetics showed that Mn2+/Fe3O4@L-Arg/P/bg release 30% drug initially within 5 h and the next 20% in 72 h with an overall 50% release in three days. Approximately, 70% drug was released from Ni2+/Fe3O4@L-Arg/P/bg. The Mn2+/Fe3O4@L-Arg/P/bg took a long time to 70% release rate than Zn2+ and Ni2+-doped vehicles. M2+/Fe3O4@L-Arg/P/bg with 10 μg/mL dosage can reduce the cell viability to 53, 31, and 94 for Zn2+, Mn2+, and Ni2+, respectively. Contrasting ability of the material was evaluated for Magnetic Resonance Imaging (MRI). The results indicate a shift from inherent T2 to T1 contrasting with a lower concentration. The parameters (like τM,τR,q, etc.) used in Solomon–Bloembergen–Morgan (SBM) theory for paramagnetic relaxation also be applicable to Fe3O4-based NPs system in terms of H-bonding to modulate the T1 contrasting in MRI. Ultra-Small Iron Oxide Nanoparticles are designed for theranostic applications. Both the core and the shell environment of the nanoparticle assembly can be modulated to achieve optimum performance in terms of drug delivery and contrasting effect under magnetic field. [ABSTRACT FROM AUTHOR]