A direct electrochemical immunoassay system based on the immobilization of α-1-fetoprotein antibody (anti-AFP), as a model system, on the surface of core-shell Fe2O3/Au magnetic nanoparticles (MNP) has been demonstrated. To fabricate such an assay system, anti-AFP was initially covalently immobilized on to the surface of core-shell Fe2O3/Au MNP. Anti-AFP-modified MNP (bio-nanoparticles) were then attached to the surface of carbon paste electrode with the aid of a permanent magnet. The performance and factors influencing the performance of the resulting immunosensor were studied. α-1-Fetoprotein antigen was directly determined by the change in current or potential before and after the antigen–antibody reaction versus saturated calomel electrode. The electrochemical immunoassay system reached 95% of steady-state potential within 2 min and had a sensitivity of 25.8 mV. The linear range for AFP determination was from 1 to 80 ng AFP ml−1 with a detection limit of 0.5 ng AFP ml−1. Moreover, the direct electrochemical immunoassay system, based on a functional MNP, can be developed further for DNA sensor and enzyme biosensor.