Magnetite nanoparticles (Fe3O4 NPs) hold a promising performance towards sensing applications. Fe3O4 NPs were synthesized by economically viable method and characterized using different techniques. X-ray diffraction (XRD) pattern of Fe3O4 NPs matched consistently with the database in JCPDS card (19–0629) for magnetite. Their average size was around 16 nm. The values of saturation magnetization and pH at point of zero charge (pHzpc) of the NPs were found to be 61.50 emu g−1 and 7.4, respectively. A novel magnetite-graphene nanocomposite (Fe3O4-GR) was then synthesized based on ex situ approach (in which pre-synthesized Fe3O4 NPs were used to anchor the graphene nanosheets). Transmission electronic microscopy (TEM) and Scanning electronic microscopy (SEM) images indicate that GR nanosheets are decorated by Fe3O4 NPs. Further, Fe3O4-GR nanocomposite modified carbon paste electrode (Fe3O4-GR/CPE) was fabricated. Its effective surface area and surface morphology were studied using cyclic voltammetry and SEM techniqes, respectively. Among Fe3O4-GR/CPE, GR/CPE and Fe3O4/CPE, the electrochemical properties of Fe3O4-GR nanocomposite were superior to the individual GR and Fe3O4. Fe3O4-GR/CPE was utilized for determination of Olanzapine drug in its formulation and it exhibited also very low detection limit (LOD = 7.29 × 10−11 M) and good selectivity towards sensing of Olanzapine in human plasma.