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A novel castor oil/water/ethanol Pickering emulsion, stabilized by magnetic nanoparticles (NPs), was developed to allow on-demand demulsification by an external magnetic field for the extraction of ethanol from aqueous solution using the castor oil. The emulsion was stabilized by Fe3O4-coated cellulose nanocrystals (CNC@Fe3O4) and lignin-coated Fe3O4 NPs (lignin@Fe3O4). The stability of the emulsions was investigated at various castor oil to ethanol-water ratios (50/50 and 70/30), various NP concentrations, and ethanol concentrations in the aqueous phase. The magnetically controlled demulsification ability of the emulsions was investigated by using a permanent magnet. The results showed that the 70/30 emulsions were more stable than the 50/50 emulsions for all the ethanol concentrations. Moreover, increasing the NP concentration increased the emulsion stability and hence, 1 w/v% NPs concentration provided the more stable systems. However, all the emulsions were successfully broken by the permanent magnet. Yet, the presence of ethanol improves the ability of the external magnetic field to demulsify these dispersions. Furthermore, the used hybrid NPs were recovered and recycled for three cycles. The recycled NPs were characterized with X-ray diffraction (XRD) and vibrating sample magnetometry (VSM) indicating that they retained their saturation magnetization and crystalline structure, demonstrating their lack of degradation over multiple recycling cycles. This study facilitates the exploration of innovative two-phase Pickering emulsions comprising three distinct liquid components and their utilization in liquid-liquid extraction processes.