Iron oxide (IO) nanoparticles (NPs) of sizes less than 50 nm are considered to be non-toxic, biodegradable and superparamagnetic. We have previously described the generation of IO NPs coated with Human Serum Albumin (HSA). HSA coating onto the IO NPs enables conjugation of the IO/HSA NPs to various biomolecules including proteins. Here we describe the preparation and characterization of narrow size distribution core-shell NIR fluorescent IO/HSA magnetic NPs conjugated covalently to Fibroblast Growth Factor 2 (FGF2) for biomedical applications. We examined the biological activity of the conjugated FGF2 on human bone marrow mesenchymal stem cells (hBM-MSCs). These multipotent cells can differentiate into bone, cartilage, hepatic, endothelial and neuronal cells and are being studied in clinical trials for treatment of various diseases. FGF2 enhances the proliferation of hBM-MSCs and promotes their differentiation toward neuronal, adipogenic and osteogenic lineages in vitro. The NPs were characterized by transmission electron microscopy, dynamic light scattering, ultraviolet-visible spectroscopy and fluorescence spectroscopy. Covalent conjugation of the FGF2 to the IO/HSA NPs significantly stabilized this growth factor against various enzymes and inhibitors existing in serum and in tissue cultures. IO/HSA NPs conjugated to FGF2 were internalized into hBM-MSCs via endocytosis as confirmed by flow cytometry analysis and Prussian Blue staining. Conjugated FGF2 enhanced the proliferation and clonal expansion capacity of hBM-MSCs, as well as their adipogenic and osteogenic differentiation to a higher extent compared with the free growth factor. Free and conjugated FGF2 promoted the expression of neuronal marker Microtubule-Associated Protein 2 (MAP2) to a similar extent, but conjugated FGF2 was more effective than free FGF2 in promoting the expression of astrocyte marker Glial Fibrillary Acidic Protein (GFAP) in these cells. These results indicate that stabilization of FGF2 by conjugating the IO/HSA NPs can enhance the biological efficacy of FGF2 and its ability to promote hBM-MSC cell proliferation and trilineage differentiation. This new system may benefit future therapeutic use of hBM-MSCs.