The objective of this study was to encapsulate iron in nanocarriers formulated with ascorbyl palmitate and 1,2-distearoyl-sn-glycero-3-phosphoethanolamine polyethylene glycol (DSPE-PEG) for oral delivery. Blank and iron (Fe) loaded nanocarriers were prepared by a modified thin film method using ascorbyl palmitate and DSPE-PEG. Surface charge of the nanocarriers was modified by the inclusion of chitosan (CHI) during the formulation process. Blank and iron loaded ascorbyl palmitate/DSPE nanocarriers were visualised by transmission electron microscopy (TEM) and physiochemical characterisations of the nanocarriers carried out to determine the mean particle size and zeta potential. Inclusion of chitosan imparted a net positive charge on the nanocarrier surface and also led to an increase in mean particle size. Iron entrapment in ascorbyl palmitate-Fe and ascorbyl palmitate-CHI-Fe nanocarriers was 67% and 76% respectively, suggesting a beneficial effect of chitosan on nanocarrier Fe entrapment. Iron absorption was estimated by measuring Caco-2 cell ferritin formation using ferrous sulphate as a reference standard. Iron absorption from ascorbyl palmitate-Fe (592.17 ± 21.12 ng/mg cell protein) and ascorbyl palmitate-CHI-Fe (800.12 ± 47.6 ng/mg, cell protein) nanocarriers was 1.35-fold and 1.5-fold higher than that from free ferrous sulphate, respectively (505.74 ± 23.73 ng/mg cell protein) (n = 6, p < 0.05). This study demonstrates for the first time preparation and characterisation of iron loaded ascorbyl palmitate/DSPE PEG nanocarriers, and that engineering of the nanocarriers with chitosan leads to a significant augmentation of iron absorption.