CoO nanocrystals (CoO NCs) were synthesized by thermal decomposition of the cobalt-oleate complex. For biological applications, water-soluble CoO NCs were obtained via a facile phase-transfer method by employing amphiphilic surfactants, such as anionic (sodium dodecyl sulfate, SDS), neutral (Pluronic F127, PF127) and cationic (cetyltrimethyl ammonium bromide, CTAB). Field-dependent magnetization measurements indicated that the type of surfactants around the CoO NCs plays a crucial role in their magnetic properties. Among them, CoO NCs functionalized with PF127 have the largest saturated magnetization (M_s) of 10.9 emu g⁻¹. To clarify the potential application in magnetic resonance imaging (MRI), longitudinal relaxivities (r₁) and transverse relaxivities (r₂) of the functionalized CoO NCs were investigated in detail. The r₂/r₁ of CoO NCs functionalized with PF127 is about 26. Therefore, they should be novel excellent potential T₂ contrast agents. Furthermore, methyl thiazolyl tetrazolium (MTT) assays show that they have low cytotoxicity in living cells. In vitro experiment results indicated that they can be taken up by living cells effectively, showing the obvious decrease of the transverse relaxation time T₂ after internalization.