The present application discloses nanoparticles, particularly nanoparticles of superparamagnetic iron oxide, which find utility in iron therapy and diagnostic imaging such as magnetic resonance (MR). The disclosed nanoparticles have been treated with an α-hydroxyphosphonic acid conjugate containing polyethylene glycol as a hydrophilic moiety to render the nanoparticles sufficiently hydrophilic to find utility in diagnostic imaging. Among the modified hydrophilic nanoparticles disclosed are those in which the hydrophilic moieties of the modifying conjugate are polyethylene oxide-based polymers and have a molecular weight greater than 5,000 dalton and less than or equal to about 30,000 daltons. Surprisingly, these nanoparticles have a more rapid and complete processing in liver of retained nanoparticles when compared to similar nanoparticles in which the PEG-based hydrophilic moiety has a molecular weight less than 5,000.