The potential of bacterial magnetic nanoparticles and magnetotactic bacteria has increased significantly in wastewater treatment. Magnetotactic bacteria and their magnetosomes exhibit unique magnetic and structural properties that facilitate the efficient removal of pollutants, including heavy metals, dyes, pesticides, and radionuclides. Unlike chemically synthesized nanoparticles, bacterial magnetosomes are biocompatible, recyclable, and can be manipulated using external magnetic fields, making them suitable for repeated use in treatment systems. This review examines the current advancements in the cultivation, large-scale manufacture, and functionalization of magnetotactic bacteria and magnetosomes, as well as their extensive applications in environmental and industrial sectors. Advanced analytical techniques play a crucial role in confirming the physical, chemical, and magnetic stability of these materials. Together, these properties make magnetotactic bacteria and their magnetosomes promising tools for eco-friendly and cost-effective wastewater treatment.