Cancer is one of the leading causes of mortality worldwide. Nanoparticles have been broadly studied and emerged as a novel approach in diagnosis and treatment of tumors. Over the last decade, researches have significantly improved magnetic nanoparticle (MNP)'s theranostic potential as nanomedicine for cancer. Newer MNPs have various advantages such as wider operating temperatures, smaller sizes, lower toxicity, simpler preparations and lower production costs. With a series of unique and superior physical and chemical properties, MNPs have great potential in medical applications. In particular, using MNPs as probes for medical imaging and carriers for targeted drug delivery systems. While MNPs are expected to be the future of cancer diagnosis and precision drug delivery, more research is still required to minimize their toxicity and improve their efficacy. An ideal MNP for clinical applications should be precisely engineered to be stable to act as tracers or deliver drugs to the targeted sites, release drug components only at the targeted sites and have minimal health risks. Our review aims to consolidate the recent improvements in MNPs for clinical applications as well as discuss the future research prospects and potential of MNPs in cancer theranostics.