In this paper, photoacoustic spectroscopy is used as a promising experimental technique to investigate biocompatible magnetic fluids. The observed spectral features, in the 0.3 to 1.0 /spl mu/m wavelength region, are discussed in terms of three distinct bands (L, S, and C). Band-L, in the spectral range of 0.70 to 0.90 /spl mu/m, is related to the characteristic coating layer of the magnetic nanoparticle. Band-S, occurring around 0.55 /spl mu/m, is related to the metal-polyoxy-hydroxy surface layer built up at the surface during the nanoparticle synthesis. Band-C (0.30-0.50 /spl mu/m) is associated to the optical absorption of the semiconductor magnetic nanoparticle. Features in band-C are discussed in terms of energy levels in the quantum-confined structure. Distinct Fe/sub 3/O/sub 4/ nanoparticles (average diameters of 3.0 and 8.5 nm) are used as core materials to address the nanoparticle size effect.