In this paper, a novel iron oxide nanocomposite hydrogel was prepared by simultaneous formation of superparamagnetic iron oxide nanoparticles and cross-linking of poly(acrylic acid) grafted onto sodium alginate polysaccharide. The prepared optimized hydrogel was characterized by Fourier transform infrared spectroscopy, thermogravimetric analysis, scanning electron microscopy with energy-dispersive X-ray analysis, atomic force microscopy, and transmission electron microscopy. Moreover, swelling capacity of the obtained hydrogel was measured at different temperatures, different pHs, absorption under load, and magnetic field to assess the sensitivity of ION-PAA-g-NaAlg hydrogel. This hydrogel was also examined as a controlled drug delivery system. Doxorubicin and tetracycline (as model drugs) release was investigated at different pHs, different temperatures, and magnetic field. The release curves were nicely fitted by the Korsmeyer-Peppas equation, and the release is controlled by polymer relaxation process.