Provided is a method for producing nano-size magnetic particles, and particularly magnetite and maghemite particles, that are useful in preparing toner products for reprographic processes. The magnetic particles are made of a controlled size through the use of a microemulsion. Precursor particles are precipitated in droplets of a disperse aqueous phase of the microemulsion. The precursor particles are oxidized in a carefully controlled environment to form the desired magnetic particles and to avoid overoxidation to produce undesirable nonmagnetic particles, such as hematite. In one embodiment, the nano-size magnetic particles are treated to improve their hydrophobicity. The treated particles have a reduced tendency to agglomerate and are easier to disperse in the preparation of toner products. The hydrophobic treatment may include connecting hydrophobic chemical groups to the magnetic particles through the use of silane coupling agents. In addition to improving the flowability characteristics of the magnetic particles, hydrophobic treatment may also be used to at least partially mask the inherent color of the nano-size magnetic particles that could otherwise interfere with preparation of color toners for use in developing sharp color images.