A new line of research is reported in this study where magnetite is used as a partial replacement of traditional aggregates in stone mastic asphalt (SMA) mixtures. The objective is to enhance the functional and mechanical properties of SMA while taking advantage of better thermal properties of magnetite to promote self-healing characteristics of the asphalt surface. Granite and gritstone based SMA mixtures were modified with 50% magnetite coarse aggregate and their mechanical, functional, and long-term performance against ageing and water sensitivity were investigated. In terms of stiffness, an increase of 45% and 32% was achieved in magnetite with granite and magnetite with gritstone mixes, respectively. Both dry and wet friction and macrotexture of magnetite-based mixtures were found either comparable or better than conventional mixtures. Furthermore, compared to control mixtures, the magnetite-based mixtures retained more stiffness after three moisture conditioning cycles. The stiffness increase after long-term ageing was marginally higher in modified mixtures than the control ones. Finally, magnetite worked on improving thermal conductivity, which is a beneficial property to promote better interface bonding between two asphalt layers.