Near-infrared (NIR)-based nanomaterials that provide efficient tumor ablation for cancer therapy have been reported. However, the issues of biocompatibility of metals or ions in inorganic nanoparticles systems such as copper and gold nanoparticles are still a matter of concern. In this study, we developed a facile and ligand-assisted co-precipitation method to synthesize biocompatible iron oxide (IO) nanocrystals with NIR absorption that provided T2-weighted magnetic resonance (MR) images and photothermal ablation characteristics suitable for cancer theranostics. Our results showed that 150-nm particles can be synthesized and optimized by using different amounts of ligand. NIR-IO nanocrystals of this size showed high photothermal conversion efficiency (21.2%) and T2-weighted MR contrast (transverse relaxivity value approximately 141 S-1 mM-1). The NIR-IO nanocrystals showed no cytotoxicity in HT-29 colorectal cancer cells without irradiation, whereas the viability of cells that received NIR-IO nanocrystals decreased significantly after 808-nm laser irradiation. The mechanism of cell death may involve alterations in protein secondary structure and membrane permeability. For in vivo studies, 4-fold enhanced tumor accumulation was significantly observed of NIR-IO nanocrystals with a magnetic field (MF) application, resulting in a 3-fold higher T2-weighted MR signal than that produced by a commercial T2-weighted MR contrast agent (Resovist®) and excellent photothermal efficacy (approximately 53 °C) for cancer treatment. The innovative NIR-IO nanocrystals showed excellent biocompatibility and have great potential as a theranostic agent against cancer.