A water-in-oil microemulsion method has been applied for the preparation of silica-coated iron oxide nanoparticles. Three different nonionic surfactants (Triton X-100, Igepal CO-520, and Brij-97) have been used for the preparation of microemulsions, and their effects on the particle size, crystallinity, and the magnetic properties have been studied. The iron oxide nanoparticles are formed by the coprecipitation reaction of ferrous and ferric salts with inorganic bases. A strong base, NaOH, and a comparatively mild base, NH4OH, have been used in each surfactant to observe whether the basicity has some influence on the crystallization process during particle formation. Transmission electron microscopy, X-ray electron diffraction, and superconducting quantum interference device magnetometry have been employed to study both uncoated and silica-coated iron oxide nanoparticles. All these particles show magnetic behavior close to that of superparamagnetic materials. By use of this method, magnetic nanoparticles as small as 1-2 nm and of very uniform size (percentage standard deviation is less than 10%) have been synthesized. A uniform silica coating as thin as 1 nm encapsulating the bare nanoparticles is formed by the base-catalyzed hydrolysis and the polymerization reaction of tetraethyl orthosilicate in microemulsion. All experimental results are also compared with those for particles synthesized in pure water.