Here in this paper, we report how the bio-compatible polymer poly ethylene glycol (PEG 20000) controls the size of the magnetite nanoparticles synthesized by the simple cost effective co-precipitation method. The size of the particles calculated by Scherrer formula from the Powder X-ray Diffraction (PXRD) reports clearly depicts this. The Fourier Transform Infrared spectroscopy (FT-IR) studies confirm the bonding of the PEG molecules with the magnetite nanoparticles. The Scanning Electron Microscope (SEM) and EDAX results confirm the surface morphology and the elemental composition. The saturation magnetization values of the particles also increases as seen from the Vibrating Sample Magnetometer (VSM) results. These particles can be very well used in various biomedical applications.