Nanoparticle formulations of nanocrystralline materials present unique opportunities for improved medical imaging and diagnostics via optical, fluorescence, and magnetic resonance imaging modalities. The common requirements of these applications are biocompatibility, high payload of contrast agents, and precise control of particle size and functionality, which allow for selective localization of contrast agents at levels sufficient to provide enhanced detection in vivo. In this work, we present a novel technology for the preparation of composite nanoparticles (CNPs) based on iron oxide nanocrystals for application as magnetic resonance imaging (MRI) contrast agents. The process relies on controlled precipitation of components under diffusion-limited conditions to produce stable particles at high concentrations of encapsulated agents using amphiphilic block copolymers to direct self-assembly. Because the particles assemble spontaneously from solution by simultaneous desolvation of components, explicit surface functionalization of the nanocrystals is not required, and the method can be applied to a variety of nanocrystals that lack appropriate surface chemistry. Experimentally measured physical properties of the CNPs(particle size and size distributions) are well predicted by models for colloid coagulation in the diffusion limited regime. In addition, CNPs of various compositions exhibit a high relaxivity (r2 = 130-200 mM-1 s-1), rendering them very attractive as T2 contrast agents for MRI. Finally, the combined incorporation of iron oxide nanocrystals with drugs into an integrated system without reduction in relaxivity is demonstrated, enabling efficient and simultaneous drug delivery and imaging.