In this study, iron oxide (Fe3O4) magnetic nanoparticles (MNPs) were loaded into poly(ε-caprolactone) (PCL) nanofıber mats via electrospinning method and the composite materials were characterized. MNPs were synthesized by a conventional co-precipitation method and treated by oleic acid to obtain hydrophobic nanoparticles. The MNPs were added to PCL solution before electrospinning at varying MNP feed concentrations (1:25, 2:25, 4:25, 8:25, 16:25 and 32:25; weight ratio of MNPs:polymer). The chemical structure of the nanofibrous membranes was investigated by Fourier transform infrared spectroscopy (FTIR). Scanning electron microscopy (SEM), and analyses by optical and confocal microscopes demonstrated that MNP-loaded PCL nanofibers (MNP@PCL NFs) were homogeneously distributed in the membranes. Fiber diameter changed and bead formation occurred as the concentration of MNPs increased from 1:25 to 32:25. The effect of MNPs concentration on drug loading, the encapsulation efficiency and the release properties of the composite nanofibers was investigated using hydrophilic (Rhodamine-B, RhodB) and hydrophobic (Nile Red, NR) dyes, compared with plain PCL nanofibers. The dyes were used as model drug compounds to simulate drug release from MNP@PCL NFs. The release rate of RhodB from the plain PCL nanofiber mats was faster compared to the composite materials. The results showed that the release of the model molecule was affected by the hydrophilic/hydrophobic character of the drug. MNP@PCL NFs may have the potential for using as localized drug delivery vehicles for tissue engineering applications.