This paper reports the synthesis of silver encapsulated beta-Fe2O3 core-shell hollow nanotubes soluble in aqueous medium. Colloidal beta-Fe2O3 nanoparticles produced by the hydrolysis of FeCl3 are grown on Ag nanoparticles in N-2 environment to produce core-shell hollow tubular structure. A variation in the amount of silver (0.23 x 10(-4) mol dm(-3) -0.76 x 10(-4) mol dm(-3)) regularly blue shifts the excitonic band due to beta-Fe2O3, and reduces the thickness of beta-Fe2O3 in the shell besides changing the morphology of the nanostructures. A typical amount of silver (0.58 X 10(-4) mol dm(-3)) leads to the development of core-shell hollow tubes (SC) in which the core consists of Ag nanoparticles with an average diameter of 3.5 nm and the shell is made of beta-Fe2O3 hollow nanotubes consisting of Cl- and NO3- ions with an average thickness and the inner diameter of 3 nm and 9 nm, respectively. Unlike pure beta-Fe2O3 nanorods, SC at 7T exhibits superparamagnetic behavior at a relatively higher temperature (100 K), whereas beta-Fe2O3 under these conditions depicted paramagnetic behavior. However, at 7T and 5 K both of the samples exhibited superparamagnetic behavior, but the magnetization for SC (0.4 emu cm(-2)) was about 5.6 times higher compared to that of pure beta-Fe2O3. The presence of specific amount of Ag in SC possibly results in the observed change in morphology, decrease in dimension and the orientation of beta-Fe2O3 nanorods in a particular direction, which contributes to the transformation in magnetic behavior associated with enhanced saturation magnetization. (C) 2011 Elsevier B.V. All rights reserved.