The purpose of this study is to develop a targeted drug carrier system. Magnetic poly (e-caprolactone) (PCL) microspheres were prepared using classical oil-in-water solvent evaporation method by loading magnetite nanoparticles and anticancer drug etoposide. The prepared magnetic microspheres were smooth, free flowing, individual and homogenous in nature. Fourier transformed infrared spectroscopy studies revealed the absence of any potential incompatibility of drug with other excipients. DSC studies were conducted to study the state of etoposide in the formulation. Further the magnetic microspheres were characterized for entrapment efficiency, drug loading, invitro release studies and subjected to particle size analysis and scanning electron microscopy. The magnetite nanoparticles were well dispersed in polymer matrix, which are responsible for magnetic response. The magnetic property of the prepared microspheres was measured by using vibrating sample magnetometer. The amount of magnetite in the formulation was estimated quantitatively by atomic absorption spectroscopy which was about 31.5%. The experimental results proved that the magnetic microspheres exhibited superparamagnetic behavior and the saturation magnetization was 7.26 emu/g. The optimized formulations exhibited a narrow size distribution which were below 10 μm and are evident from SEM analysis. Formulation batches prepared with drug/polymer ratio 1:10 showed a maximum encapsulation efficiency and the invitro release profile in phosphate buffer (pH 7.4) solution showed an extended release of etoposide up to 76.25% at the end of 21 day. Histopathological studies proved that the etoposide loaded magnetic microspheres were nontoxic and safe.