Magnetic bioactive glass-ceramic (MGC) powders with nominal compositions of (45 - x)SiO224.5CaO24.5Na2O6P2O5xFe2O3 (x = 2, 4, 6, 8, 10, and 15 wt%) have been synthesized by a sol-gel route by systematically substituting silicon dioxide with iron oxide in Hench's 45S5 glass composition. Powder X-ray diffraction studies revealed a variation in the percentage of combeite (Ca2Na2Si3O9), magnetite (Fe3O4), and hematite (Fe2O3) nanocrystalline phases in MGC powders as a function of composition. Zeta potential measurements showed that MGC containing up to 10 wt% iron oxide formed stable suspensions. The saturation magnetization and heat generation capacity of MGC fluids increased with an increase in iron oxide content. Degradation of MGC powders was investigated in phosphate buffered saline (PBS). The in vitro bioactivity of the MGC powders taken in pellet form was confirmed by observing the pH variation as well as hydroxyapatite layer (HAp) formation upon soaking in modified simulated body fluid. These studies showed a decrement in the overall bioactivity in samples with high iron oxide content due to the proportional decrease in the silanol group. Monitoring the proliferation of MG-63 osteoblast cells in Dulbecco's Modified Eagle Medium (DMEM) revealed that MGC with up to 10 wt% iron oxide exhibited acceptable viability. The systematic study revealed that the MGC with 10 wt% iron oxide exhibited optimal cell viability, magnetic properties and induction heating capacity, which were better than those of FluidMag-CT, which is used for hyperthermia treatment.