Owing to its ideally suited nuclear decay properties [T_½ = 26.9 h, E_β(max) = 1.85 MeV, E_γ = 81 keV (6.4%)] and availability in adequate quantity at an affordable cost, ¹⁶⁶Ho is an attractive choice for treatment of arthritis of knee joints. Production of ¹⁶⁶Ho in nuclear reactor and development of a radiochemical formulation for radiation synovectomy using highly agglomerated iron oxide nanoparticles having 1-10 μm size range are reported. Surface of agglomerated iron oxide nanoparticles were radiolabeled with ¹⁶⁶Ho in high yield when dispersed in 0.1 M NaHCO₃ solution at pH ~8. EDX analysis showed loading of 7 atom % of Ho with respect to Fe. The radiolabeled particles exhibited excellent in vitro stability when stored in normal saline and serum at 37°C. Biodistribution studies performed after intra-arterial injection of the ¹⁶⁶Ho-labeled particles into one of the knee joints of a normal Wistar rats showed near-complete retention of the injected activity (> 98%) within the joint cavity even after 72 h post injection. This observation was also confirmed from the sequential whole-body radio-luminescence imaging studies in the animal model. The reported agent could emerge as a potential radiochemical formulation potential material for treatment of arthritis of knee joints.