The use of nanoparticles has increased significantly over the past few years in a number of fields, including diagnostics, biomedicine, environmental remediation, and water treatment, generating public interest. Among various types of nanoparticles, magnetic nanoparticles (MNPs) have emerged as an essential tool for biomedical applications due to their distinct physicochemical properties compared to other nanoparticles. This review article focuses on the recent growth of MNPs and comprehensively reviews the advantages, multifunctional approaches, biomedical applications, and latest research on MNPs employed in various biomedical techniques. Biomedical applications of MNPs hold on to their ability to rapidly switch magnetic states under an external field at room temperature. Ideally, these MNPs should be highly susceptible to magnetization when the field is applied and then lose that magnetization just as quickly once the field is removed. This unique property allows MNPs to generate heat when exposed to high-frequency magnetic fields, making them valuable tools in developing treatments for hyperthermia and other heat-related illnesses. This review underscores the role of MNPs as tools that hold immense promise in transforming various aspects of healthcare, from diagnostics and imaging to therapeutic treatments, with discussion on a wide range of peer-reviewed articles published on the subject. At the conclusion of this work, challenges and potential future advances of MNPs in the biomedical field are highlighted.