Theranostic nanostructures serve a dual purpose of therapy and diagnosis. A major fraction of these are based on polymer coated magnetic nanostructures of iron oxides (magnetite and maghemite), owing to the efficient drug loading capacity of polymer shells and enhanced magnetic contrast effects of the iron oxide core. In the current work we are proposing poly(2-ethyl-2-oxazoline) coated linear thermoresponsive nanostructures of maghemite (γ-FeO) for potential application in targeted cancer therapy. The polymer coating was obtained via a modified sol-gel technique based on entropically driven phase separation of poly(2-ethyl-2-oxazoline) above its cloud point (CP) temperature of 63 °C in water. The developed nanostructures were further loaded with paclitaxel, a polar anticancer compound at room temperature (25 °C). The entropically driven release of paclitaxel at various concentrations and physiological temperatures was modeled and their application to the PC3 prostrate cancer cell line was investigated by treating in vitro. The steering efficiency of the magnetic nanostructures during their navigation through large blood vessels was also analyzed with the help of a synthetic model of the human axillary artery. The proposed application of these newly developed nanostructures can easily be extended towards localized delivery of additional polar anticancer drugs like cisplatin and doxorubicin.