Fine size-controlled synthesis of superparamagnetic iron-oxide and its nanocomposites are reported by a supersonic thermal-plasma assisted process. The effects of oxygen flow rates, gas injection position, and carrier gas types were studied, and the phase composition of the product material was estimated by Rietveld refinement technique. The smallest iron-oxide nanoparticle sample with 10 nm average size was synthesized at 19 liters per minute flow of oxygen, which also had the largest contribution from the magnetite/maghemite phases at 88%. The saturation magnetization and the magnetic coercivity of this superparamagnetic sample were measured as 28 emu g(-1) and 6 Oe, respectively, the latter one is the smallest value reported in the literature produced by a plasma method. The sample demonstrated satisfactory biocompatibility behavior, which should be suitable for advanced bio-medical and environmental applications. A superparamagnetic nanocomposite material containing iron-oxide, carbon-encapsulated iron nanoparticles, along with single-walled carbon nanotubes was also produced while injecting oxygen into the vacuum chamber and using hydrogen as the carrier gas. The average particle size was 5.1 nm, which had saturation magnetization of 52 emu g(-1) and coercivity 10 Oe. The sample was found to be slightly more toxic, assumed due to the presence of the single walled carbon nanotubes. The high rate of production and single step processing were the other important advantages of this synthesis technique for the nanocomposite material.