Nowadays, magnetic nanoparticles (MNPs) are applied in numerous fields, especially in biomedical applications. Since biofluidic samples and biological tissues are nonmagnetic, negligible background signals can interfere with the magnetic signals from MNPs in magnetic biosensing and imaging applications. In addition, the MNPs can be remotely controlled by magnetic fields, which make it possible for magnetic separation and targeted drug delivery. Furthermore, due to the unique dynamic magnetizations of MNPs when subjected to alternating magnetic fields, MNPs are also proposed as a key tool in cancer treatment, an example is magnetic hyperthermia therapy. Due to their distinct surface chemistry, good biocompatibility, and inducible magnetic moments, the material and morphological structure design of MNPs has attracted enormous interest from a variety of scientific domains. Herein, a thorough review of the chemical synthesis strategies of MNPs, the methodologies to modify the MNPs surface for better biocompatibility, the physicochemical characterization techniques for MNPs, as well as some representative applications of MNPs in disease diagnosis and treatment are provided. Further portions of the review go into the diagnostic and therapeutic uses of composite MNPs with core/shell structures as well as a deeper analysis of MNP properties to learn about potential biomedical applications.