The present disclosure includes a method for preparing an aqueous dispersion of γ-Fe2O3 nanoparticles. The method includes grinding an iron (II) hydrated salt, an iron (III) hydrated salt, an inorganic salt, and alkali hydroxide in a grinding or milling machine. The inorganic salt may be a salt matrix that prevents growth and aggregation of the synthesized nanoparticles. The aqueous dispersion of γ-Fe2O3 nanoparticles may optionally be hydrothermally treated to become an aqueous dispersion of α-Fe2O3 nanoparticles. Also disclosed is a method for preparing an mixture of α-Fe2O3 nanoparticles and γ-Fe2O3 nanoparticles, in which at least an iron (III) hydrated salt, an inorganic salt, and alkali hydroxide are ground in a grinding or milling machine. Uses for the nanoparticles include: a magnetic resonance image contrast agent, a color print ink, an artificial tanning pigment, a photocatalyst for degradation of organic dye, a red pigment, an adsorbent for waste water treatment, a catalyst support, and a catalyst.