Atom transfer radical polymerization (ATRP) of 2isopropenyl-2-oxazoline was optimized both in solution and initiated from carbonyl iron (CI) particle surface (SI-ATRP) in order to obtain polymers with well-defined molar mass and narrow dispersity. The polymerization procedure was thoroughly investigated by size exclusion chromatography and 1 H NMR and optimized from the point of view type of initiator, ligand, copper catalyst, and solvent. Finally, the poly(2-isopropenyl-2-oxazoline) (PIPOx) with controlled molar masses up to 20,000 g/mol and dispersity in the range of 1.2−1.5 were successfully prepared, while high conversions could be reached. Polymerization conditions using halogen exchange leading to well-defined PIPOx were also developed and used for SI-ATRP. SI-ATRP was finally applied for synthesis of magnetic CI-PIPOx core−shell particles with two various molar masses of the grafted PIPOx. Finally, as a proof of applicability of such hybrid particles, the particles were dispersed in the phosphate buffer saline and glycerol to obtain the magnetorheological fluid with blood-like characteristics. Magnetorheological and cytotoxicity investigations proved that noncytotoxic CI-PIPOx core−shell particles provided the system with sufficient yield stress values to act as an embolization agent.