Advances in nanotechnology have pushed forward the synthesis of a variety of functional nanoparticles (NPs) such as semiconductor quantum dots (QDs), magnetic and metallic NPs. The unique electronic, magnetic, and optical properties exhibited by these nanometer-sized materials have enabled a broad spectrum of biomedical applications. In particular, iron-oxide-based magnetic NPs have proved to be highly versatile deep-tissue imaging agents, having been incorporated into clinical applications due to their biocompatibility. This Interdisciplinary Review will focus on the recent advances in strategies for the synthesis and surface modification of highly monodisperse magnetic NPs and their use in imaging, drug delivery, and innovative ultrasensitive bioassays.