Recent advances in the development of magnetic nanoparticles (MNPs) have shown promise in the development of new personalized therapeutic approaches for clinical management of cancer patients. The unique physicochemical properties of MNPs endow them with novel multifunctional capabilities for imaging, drug delivery and therapy, which are referred to as theranostics. To facilitate the translation of those theranostic MNPs into clinical applications, extensive efforts have been made on designing and improving biocompatibility, stability, safety, drug-loading ability, targeted delivery, imaging signal and thermal- or photodynamic response. In this review, we provide an overview of the physicochemical properties, toxicity and theranostic applications of MNPs with a focus on magnetic iron oxide nanoparticles.