Monodisperse small iron oxide nanoparticles functionalized with dendritic polyglycerol (dPG) or dendritic polyglycerol sulfate (dPGS) are prepared. They are highly stable in aqueous solutions as well as physiological media. In particular, oleic acid capped iron oxide particles (core diameter = 11 ± 1 nm) were modified by a ligand exchange process in a one pot synthesis with dPG and dPGS bearing phosphonate as anchor groups. Dynamic light scattering measurements performed in water and different biological media demonstrate that the hydrodynamic diameter of the particles is only slightly increased by the ligand exchange process resulting in a final diameter of less than 30 nm and that the particles are stable in these media. It is also revealed by magnetic resonance studies that their magnetic relaxivity is reduced by the surface modification but it is still sufficient for high contrast magnetic resonance imaging (MRI). Additionally, incubation of dPGS functionalized iron oxide nanoparticles with human umbilical vein endothelial cells showed a 50% survival at 85 nM (concentration of nanoparticles). Surface plasmon resonance (SPR) studies demonstrate that the dPGS functionalized iron oxide nanoparticles inhibit L-selectin ligand binding whereas the particles containing only dPG do not show this effect. Experiments in a flow chamber with human myelogenous leukemia cells confirmed L-selectin inhibition of the dPGS functionalized iron oxide nanoparticles and with that the L-selectin mediated leukocyte adhesion. These results indicate that dPGS functionalized iron oxide nanoparticles are a promising contrast agent for inflamed tissue probed by MRI.