A modified double emulsion evaporation method was devised to encapsulate active ingredients to be used for theranostic purposes. In comparison with classical double emulsion methods, the solvents used for this modified method are miscible. Aqueous and organic ferrofluids having different solid contents of iron oxide nanoparticles were prepared by the co-precipitation method. Different materials were screened for the preparation of biodegradable and biocompatible nanoparticles via this new modified double emulsion evaporation method. Factors affecting the final particle size were investigated by encapsulating a hydrophilic model drug that permitted us to prepare a recipe using polycaprolactone (PCL) as polymer, dichloromethane (DCM) as organic solvent and polyvinyl alcohol (PVA) as stabilizing agent. The characterization of aqueous and organic ferrofluids alone, Stilbene and iron oxide loaded nanoparticles was done by studying particle size, size distribution, zeta potential and morphology, the magnetic properties and chemical composition. All the characterization results showed that the process is praiseworthy for encapsulation of iron oxide nanoparticles (in both aqueous and organic medium) along with an active ingredient for theranostic purposes with a final size of about 300 nm.