Combination of quantum dots (QDs) and magnetic nanoparticles (MNPs) as magnetic quantum dots (MQDs) has a broad range of applications as multifunctional nanoscale devices in biological imaging, medical nano-diagnostics and nanomedicine. MQDs derived from iron oxide nanoparticles and QDs possess excellent superparamagnetic and fluorescent properties, respectively making them multifunctional nanoprobes because of their; (a) strong magnetic strength with tunable functionality, such as rapid and simple magnetic separation, (b) intense and stable fluorescence from QDs combined with tunable biological functionality upon QDs' bio-activation, and (c) imaging/visualization by simple ultraviolet light exposure. These excellent features of MQD nanoprobes enable them to be used for magnetic resonance imaging (MRI) as contrast agents, nano-diagnostic systems for Point-of-Care (PoC) disease diagnosis, theranostics nanorobots and in other bio-medical applications. Most of MQDs are derived from iron based MNPs because of their abundancy, superparamagnetic properties, low cost and easy to synthesize. In this review, we present different methods employed for chemical synthesis of MQDs derived from iron oxide MNPs, their major chemical compositions and important parameters, such as precursor compositions, quantum yield and magnetic properties. The review also summarizes the most frequently used MQDs in applications such as bio-imaging, drug delivery, biosensor platforms and finally ends with future prospects and considerations for MQDs in biomedical applications.