Magnetic nanoparticles (MNPs) have found extensive application in the biomedical domain due to their enhanced biocompatibility, minimal toxicity, and strong magnetic responsiveness. MNPs exhibit great potential as nanomaterials in various biomedical applications, including disease detection and cancer therapy. Typically, MNPs consist of a magnetic core surrounded by surface modification coatings, such as inorganic materials, organic molecules, and polymers, forming a nucleoshell structure that mitigates nanoparticle agglomeration and enhances targeting capabilities. Consequently, MNPs exhibit magnetic responsiveness in vivo for transportation and therapeutic effects, such as enhancing medical imaging resolution and localized heating at the site of injury. MNPs are utilized for specimen purification through targeted binding and magnetic separation in vitro, thereby optimizing efficiency and expediting the process. This review delves into the distinctive functional characteristics of MNPs as well as the diverse bioactive molecules employed in their surface coatings and their corresponding functionalities. Additionally, the advancement of MNPs in various applications is outlined. Additionally, we discuss the advancements of magnetic nanoparticles in medical imaging, disease treatment, and in vitro assays, and we anticipate the future development prospects and obstacles in this field. The objective is to furnish readers with a thorough comprehension of the recent practical utilization of MNPs in biomedical disciplines.