Background In this study, an attempt has been made with the advent of technology to prepare a multifunctional nanobiocomposite (NBC) for targeted drug delivery in cancer therapy. Methods Collagen (C) was fabricated as nanofibers with multifunctional moieties viz. CFeAb*D by incorporating iron oxide nanoparticles (Fe), coupling with fluorescein isothiocyanate (FITC) labeled antibody (Ab*) and loading an anticancer gemcitabine drug (D). This NBC was characterized by conventional methods and evaluated for its biological activities. Results The UV-vis and FTIR spectroscopic studies revealed the fluorescein to protein ratio and revealed the presence of iron oxide nanoparticles and their interaction with the collagen molecules, respectively. While SDS-PAGE showed the proteinaceous nature of collagen, VSM and TEM studies revealed magnetic saturation as 54.97 emu/g and a magnetic nanoparticle with a diameter in the range of 10-30 nm and the dimension of nanofiber ranging from 97 to 270 nm. A MRI scan has shown a super paramagnetic effect, which reveals that the prepared NBC can be used as a MRI contrast agent. The MTT assay has shown biocompatibility and an apoptotic effect while phase contrast microscopy exhibited receptor mediated uptake of endocytosis. Conclusion The novelty in the prepared NBC lies in the collagen nanofibers, which have a higher penetrating property without causing much cell damage, biocompatibility and multifunctional properties and is able to carry multifunctional agents. General significance The study has demonstrated the possible use of CFeAb*D as a multifunctional NBC for biomedical applications. © 2013 Elsevier B.V.