The purpose of this study was to develop targeted polymeric magnetic nanoparticle system for brain imaging. Near infrared dye indocyanine green (ICG) or p-gycoprotein substrate rhodamine 123 (Rh123) were encapsulated along with oleic acid coated magnetic nanoparticles (OAMNP) in a matrix of poly(lactide-co-glycolide) (PLGA) and methoxy poly(ethyleneglycol)-poly(lactide) (Met-PEG-PLA). The nanoparticles were evaluated for morphology, particle size, dye content and magnetite content. The in vivo biodistribution study was carried out using three groups of six male Sprague Dawley rats each. Group I received a saline solution containing the dye, group II received dye-loaded polymeric magnetic nanoparticles without the aid of a magnetic field, and group III received dye-loaded polymeric magnetic nanoparticles with a magnet (8000 G) placed on the head of the rat. After a preset exposure period, the animals were sacrificed and dye concentration was measured in the brain, liver, kidney, lungs and spleen homogenates. Brain sections were fixed, cryotomed and visualized using fluorescence microscopy. The particles were observed to be spherical and had a mean size of 220 nm. The encapsulation efficiency for OAMNP was 57%, while that for ICG was 56% and for Rh123 was 45%. In the biodistribution study, while the majority of the dose for all animals was found in the liver, kidneys and spleen, group III showed a significantly higher brain concentration than the other two groups (p < 0.001). This result was corroborated by the fluorescence microscopy studies, which showed enhanced dye penetration into the brain tissue for group III. Further studies need to be done to elucidate the exact mechanism responsible for the increased brain uptake of dye to help us understand if the magnetic nanoparticles actually penetrate the blood brain barrier or merely deliver a massive load of dye just outside it, thereby triggering passive diffusion into the brain parenchyma. These results reinforce the potential use of polymeric magnetically-targeted nanoparticles in active brain targeting and imaging.