A novel α-Ni(OH)₂/Ni magnetic nanocatalyst was prepared for facilitating the deiodination of iohexol. Ni(II) was reduced by NaBH₄ in an aqueous suspension of magnetite nanoparticles to prepare the deiodination nanocatalyst. The α-Ni(OH)₂/Ni@Fe₃O₄ nanocatalyst was characterized by field emission scanning electron microscopy, energy-dispersive X-ray spectroscopy, X-ray diffraction spectroscopy, diffuse reflectance spectroscopy, Fourier transform infrared spectroscopy, X-ray photoelectron spectroscopy, high-resolution transmission electron microscopy, and vibrating sample magnetometry. The catalyst released iodide from iohexol when NaBH₄ was employed as the reducing agent. Afterward, a new iodide catalyzed flow injection (FI) setup was established to develop an efficient approach for trace iodide sensing. A chloramine reagent was prepared in situ for oxidizing 3-methyl-2-benzothiazolinone hydrazone before coupling with N-(1-naphthyl) ethylenediamine in an aqueous HCl medium, leading to an intense blue-colored product. An indirect ultra-sensitive iohexol detection approach was established by combining the deiodination of iohexol with the iodide catalyzed FI approach. Absorbance at 590 nm was linear in the range of 2.0–40.0 nmol L⁻¹ of iohexol and the limit of detection (LOD) of 0.9 nmol L⁻¹. The method showed satisfactory repeatability and accuracy. Overall, the method was appropriately selective for successful analysis of iohexol in a drug formulation and various urine and water samples.