The biological synthesis of nanoparticles is emerging as a potential method for nanoparticle synthesis due to its non-toxicity and simplicity. We report the ability of Bacillus subtilis strains isolated from rhizosphere soil to produce iron oxide nanoparticles. B. subtilis strains having the potential for the extracellular biosynthesis of $Fe_3O_4$ nanoparticles were isolated from rhizosphere soil, identified and characterized. A bactericidal protein subtilin was isolated from all the isolates of B. subtilis, which is a characteristic for the species. The isolated subtilin was tested against the bacterial strain, E. coli. The supernatant of the bacterial culture was used for the synthesis of $Fe_3O_4$ nanoparticles. The formation of nanoparticles was assessed by using UV-Visible spectrophotometer. FTIR and SEM analysis were used in order to confirm the formation and size of the nanoparticles. Further, the effect of incubation time, pH, and temperature on the formation of $Fe_3O_4$ nanoparticles was studied. The successful synthesis of stabilized $Fe_3O_4$ nanoparticles, which was capped by the organic group, indicates the applicability of the isolated B. subtilis strain for the bulk synthesis of iron oxide nanoparticles.