The effect of the length of surfactant molecules on the surface of the nanoparticles on the thermal conductivity of nanofluids is studied. Magnetite ($$\hbox {Fe}_{3}\hbox {O}_{4}$$ Fe3O4 ) nanoparticles of comparable sizes are stabilized with short-chain capric acid ($$\hbox {C}_{9}\hbox {H}_{19}\hbox {COOH}$$ C9H19COOH ) and long-chain stearic acid ($$\hbox {C}_{17}\hbox {H}_{35}\hbox {COOH}$$ C17H35COOH ) molecules. Thermal conductivity of the two surfactant-coated magnetite nanoparticles dispersed in toluene is measured as a function of the concentration of the particles in the fluids and in the presence of a magnetic field. Studies showed that the critical concentration for thermal conductivity enhancement is lower for stearic-acid-coated fluid as compared with the capric-acid-coated fluid. Comparable enhancement in the thermal conductivity is observed at higher concentrations of the particles. Relatively larger enhancement in the thermal conductivity is observed for the capric-acid-coated fluid in a magnetic field. The difference in the enhancement in the thermal conductivity, depending on the chain length of the surfactant, is explained in terms of the inter-particle magnetic interactions and formation of clusters.