The study of exogenous and endogenous nanoscale magnetic material in biology is important for developing biomedical nanotechnology as well as for understanding fundamental biological processes such as iron metabolism and biomineralization. Here, we exploit the magneto-optical Faraday effect to probe intracellular magnetic properties and perform magnetic imaging, revealing the location-specific magnetization dynamics of exogenous magnetic nanoparticles within cells. The opportunities enabled by this method are shown in the context of magnetic hyperthermia; an effect where local heating is generated in magnetic nanoparticles exposed to high-frequency AC magnetic fields. Magnetic hyperthermia has the potential to be used as a cellular-level thermotherapy for cancer, as well as for other biomedical applications that target heat-sensitive cellular function. However, previous experiments have suggested that the cellular environment modifies the magnetization dynamics of nanoparticles, thus dramatically altering their heating efficiency. By combining magneto-optical and fluorescence measurements, we demonstrate a form of biological microscopy that we used here to study the magnetization dynamics of nanoparticles in situ, in both histological samples and living cancer cells. Correlative magnetic and fluorescence imaging identified aggregated magnetic nanoparticles colocalized with cellular lysosomes. Nanoparticles aggregated within these lysosomes displayed reduced AC magnetic coercivity compared to the same particles measured in an aqueous suspension or aggregated in other areas of the cells. Such measurements reveal the power of this approach, enabling investigations of how cellular location, nanoparticle aggregation, and interparticle magnetic interactions affect the magnetization dynamics and consequently the heating response of nanoparticles in the biological milieu.