The use of magnetic nanoparitilces for biological and biomedical applications such as protein separation, targeted drug delivery, hyperthermia treatment, use as contrast agents of magnetic resonance imaging, biosensing, magnetic fluids environmental remediation is one of the most attractive fields of nanotechnology today because of their unique magnetic properties and the potential to function at cellular and molecular level of biological interactions. To apply them in biological fluids or aqueous environment it is essential to modulate the chemical nature of magnetic nanoparticle surfaces to increase their water solubility and colloidal stability in aqueous medium. By employing different coating technologies they cannot only be rendered longterm stable in biological fluids but also functionalized to fulfill different tasks, like molecular targeting or linking of therapeutic agents. To achieve this goal different polymeric coatings are applied to provide solubility and stability in aqueous solution and additional functional groups for attachment. Taken together the versatile modifications described in this review improved the ability to specifically tailor the features and properties of magnetic nanoparticles for biomedical applications.