The physico-chemical mechanisms associated with surfactant-free depletant stabilized water-in-oil microemulsion based shell encapsulation processes merit detailed investigation owing to the possibility of a direct correlation between encapsulation and the stable water-in-oil microemulsion system. The presence of core nanoparticles is expected to influence the formation of stable water-in-oil microemulsion system wherein polyethylene glycol (PEG) is used as depletant material. The depletant is expected to play a dual role: on one hand, it reduces the surface tension of de-ionized water during the synthesis of core while on the other hand, it helps to form stable water-in-oil microemulsion system (surfactant free) and the subsequent organization of silica coating over magnetite and systematic measurements have implications on nano encapsulation. The water-in-oil microemulsion system stabilized by depletant material is formulated with the presence of core-nanoparticles. The stability of the water-in-oil microemulsion is quantified by measuring the average hydrodynamic diameter. The presence of silica coating on core nanoparticles is robustly demonstrated using (a) small angle X-ray scattering data and Guinier plot analysis, (b) isoelectric point measurement, (c) high-resolution transmission electron microscopy, and (d) infrared spectroscopy. When the concentration of PEG and water-particles mixture (WP mixture) increases, the average hydrodynamic diameter of water-in-oil microemulsion decreases. Multiple magnetite nanoparticles are accommodated within each water droplet, without the occurrence of instability/agglomeration event. This ensures a higher yield via this process. Breakdown of stable water-in-oil microemulsion hinders the shell coating process and this is a first attempt to form the surfactant-free depletant stabilized water-in-oil microemulsion systems. The effects observed in this work have important implications for the development of new approaches to the formation of water-in-oil microemulsion systems and subsequent encapsulation processes. © 2019 Elsevier B.V.