Nanobiotechnology has garnered immense attention across multidisciplinary fields, particularly for its biopharmaceutical applications. This study aims to synthesize iron nanoparticles (FeNPs) using an aqueous extract of Murraya koenigii (AE-Mk) and evaluate their biological activity. The initial synthesis was confirmed via ultraviolet–visible spectroscopy, which displayed an absorption band with a maximum wavelength at 620 nm. The contribution of AE-Mk to FeNPs synthesis was assessed using Fourier transform infrared spectroscopy, which identified various functional groups, including alcohol, N–H stretch, aliphatic primary amine, carboxylic acid, alkyne, and alkane/alkene. Characterization confirmed the elemental nature, amorphous form, and aggregate morphology of FeNPs, as observed through energy-dispersive X-ray, X-ray diffraction, and scanning electron microscopy, respectively. FeNPs exhibited a total phenolic content of 84.23 μg GAE/mg and a total flavonoid content of 78.62 μg QE/mg at 1 000 μg/mL. Additionally, they showed significant reducing ability (69.43%) and prominent scavenging potential against 2,2-diphenyl-1-picrylhydrazyl (80.63%), nitric oxide (73.01%), and hydrogen peroxide (71.62%) at 600 μg/mL. Strong antimicrobial activity was observed at 500 μg/mL against Bacillus subtilis (19 mm), Escherichia coli (16 mm), Schizophyllum commune (19 mm), and Aspergillus niger (13 mm). The biological compatibility of FeNPs was evaluated in Wistar rats, showing no adverse effects at the administered dose (50 μg/mL). Furthermore, in vitro anticancer activity at 100 μL showed significant cell viability loss (58.23%, IC₅₀: 51.35) against HeLa cell lines. These findings highlight the dynamic potential of FeNPs for biomedical applications.