We demonstrate here the wet chemical synthesis of cobalt doped gamma-Fe2O3 nanoparticles and the subsequent effect on magnetic properties with the variation in dopant concentration. It is observed that cobalt can be homogeneously doped into the gamma-Fe2O3 lattice up to 5 mol% without any appreciable change in the particle size (similar to 6 nm). Further increase in cobalt concentration (10 mol% here) resulted in an increase in particle size (similar to 9 nm) due to possible adsorption of a cobalt layer on the surface of gamma-Fe2O3 nanoparticles rather than complete doping in the iron oxide lattice. The ac susceptibility measurements revealed an increase in blocking temperature (T-B) with percentage variation in cobalt doping (2-10%), indicating substitution of Fe3+ ions by Co2+ ions in the gamma-Fe2O3 lattice. The dc magnetization measurements showed an increase in saturation magnetization only up to 5%, beyond which it significantly diminished. The reduction in saturation magnetization is attributed to the contribution from surface anisotropy in cobalt coated gamma-Fe2O3 nanoparticles.