The lyophobic surface of monodisperse magnetic nanoparticles capped by oleic acid was made to be more lyophilic by ozonolysis to increase the stability of the suspension in polar solvents like ethanol. The ozone oxidatively cleaved the double bond of oleic acid to form carbonyl and carboxyl groups on the surface of the nanoparticles. Additionally, interfacial ligand exchange of the capping molecules was applied to make the hydrophobic particle surface more hydrophilic. The magnetic particles showed enhanced miscibility and short-term stability in water after interfacial ligand exchange. The structure changes of the capping molecules on the nanoparticle surfaces were investigated using Fourier transform infrared (FTIR) spectroscopy and X-ray photoelectron spectroscopy (XPS). From these spectroscopy studies, the cleavage of the oleic acid and the formations of the carboxyl and carbonyl groups on the particle surface were confirmed. The shape and the magnetic properties of the nanoparticles were maintained after the surface modification. Ozonolysis is an effective method in modifying the lyophobic surface of the magnetic nanoparticles.