Controlled preparation of iron nanoparticles through reduction of Fe3+ ions is investigated, using potassium borohydride solution in a microemulsion system. The effect of three low-cost cationic, anionic and non-ionic surfactants at various concentrations on the size of prepared iron nanoparticles is studied. Results show that the anionic surfactant, sodium dodecyl sulfate (SDS), significantly prevents the growth of iron nanoparticles. The structure, size and surface area of the particles are investigated using XRD, TEM, and BET characterisation methods. The average size and surface area of produced iron nanoparticles at the optimum SDS surfactant concentration are 12 nm and 70 m²/g, respectively. Removal ability of synthesised iron nanoparticles against nitrate and mercury ions is also investigated. Results show that small quantities of as-prepared iron nanoparticles can remediate nitrate and mercury solutions to standard levels without having to control the solution pH.