A novel interfacially active and magnetically responsive nanoparticle is designed and prepared by direct grafting of bromoesterified ethyl cellulose (EC‐Br) onto the surface of amino‐functionalized magnetite (Fe3O4) nanoparticles. Due to its strong interfacial activity, ethyl cellulose (EC) on the magnetic nanoparticles enables the EC‐grafted Fe3O4 (M‐EC) nanoparticles to be interfacially active. The grafting of interfacially active polymer EC on magnetic nanoparticles is confirmed by zeta‐potential measurements, diffuse reflectance infrared Fourier‐transform spectroscopic (DRIFTS) characterization, and thermogravimetric analysis (TGA). Scanning electron microscopy (SEM) images show a negligible increase in particle size, confirming the thin silica coating and grafted EC layer. The magnetization measurements show a marginal reduction in saturation magnetization by silica coating and EC grafting of original magnetic nanoparticles, confirming the presence of coatings. The M‐EC nanoparticles prepared in this study show excellent interfacial activity and highly ordered features at the oil/water interface, as confirmed using the Langmuir–Blodgett technique and atomic force microscopy (AFM). The magnetic properties of M‐EC nanoparticles at the oil/water interface make the interfacial properties tunable by or responsive to an external magnetic field. The occupancy of M‐EC at the oil/water interface allows rapid separation of the water droplets from emulsions by an external magnetic field, demonstrating enhanced coalescence of magnetically tagged stable water droplets and a reduced overall volume fraction of the sludge.