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In this study, a synthetic method to produce water-soluble iron−gold (Fe−Au) alloy nanoparticles is described. The diameter of the alloy nanoparticles is 4.9 ± 1.0 and 3.8 ± 1.0 nm for two different precursors of iron, ferrous sulfate heptahydrate (Fe 2+) and iron pentacarbonyl (Fe 0). The X-ray powder diffraction of the alloyed nanoparticles shows an appreciable shift in 2θ peak positions relative to pure gold or iron. Using Vegard’s law, we estimated the particle’s iron content to be 14.8 ± 4.7 mol %. The lattice constant of the alloy nanoparticles is found to be 4.0449 ± 0.0375 Å. The high-resolution transmission electron microscopy images show the presence of icosahedral structures in agreement with the previous high temperature synthesis of the Fe−Au alloy nanoparticles. The optical absorption of the alloy nanoparticles is distinctive from pure gold nanoparticles and shows a relatively narrow absorption band in the range of 642−662 nm depending upon the amount of gold precursor used. [ABSTRACT FROM AUTHOR]