There is a clear need for the development of novel materials for bone regeneration. There is, however, with the exception of poly-(methyl methacrylate) a lack of mouldable polymeric fillers for irregular bone defects. In this thesis, we investigate the production of a new bone graft replacement combining magnetite nanoparticles with polycaprolactone (PCL) to produce a material that can soften in response to the application of an alternating magnetic field. The magnetite nanoparticles were synthesized by a non-surfactant method and then emulsified with PCL. Particle size analysis using light scattering showed that the size distributions of magnetite nanoparticles were influenced by acid concentration and mixing conditions. In contrast, the size of the PCL particles were not strongly related to the mixing conditions, but was influence by the stabilizer used during emulsification. The magnetite nanoparticles showed superparamagnetic behaviour when analysed using SQUID. In the thermal test, magnetite nanoparticles display smooth curves both in the heating and cooling processes and do not shows significant heat loss. Scanning electron microscopy and chemical analysis showed that the magnetite nanoparticles were evenly distributed through the polymer matrix and could be caused to melt following an appropriate external magnetic stimulus. It was demonstrated that magnetite containing microspheres could successful be used for the encapsulation and delivery of antibiotics at a dose which was sufficient to be lethal to E. coli.