Background: Magnetically controlled capsule endoscopy (MCCE) is a non-invasive, painless, comfortable, and safe equipment to diagnose gastrointestinal diseases (GID), partially overcoming the shortcomings of conventional endoscopy and wireless capsule endoscopy (WCE). With advancements in technology, the main technical parameters of MCCE have continuously been improved, and MCCE has become more intelligent. Objectives: The aim of this systematic review was to summarize the research progress of MCCE and artificial intelligence (AI) in the diagnosis and treatment of GID. Data Sources and Methods: We conducted a systematic search of PubMed and EMBASE for published studies on GID detection of MCCE, physical factors related to MCCE imaging quality, the application of AI in aiding MCCE, and its additional functions. We synergistically reviewed the included studies, extracted relevant data, and made comparisons. Results: MCCE was confirmed to have the same performance as conventional gastroscopy and WCE in detecting common GID, while it lacks research in detecting early gastric cancer (EGC). The body position and cleanliness of the gastrointestinal tract are the main factors affecting imaging quality. The applications of AI in screening intestinal diseases have been comprehensive, while in the detection of common gastric diseases such as ulcers, it has been developed. MCCE can perform some additional functions, such as observations of drug behavior in the stomach and drug damage to the gastric mucosa. Furthermore, it can be improved to perform a biopsy. Conclusion: This comprehensive review showed that the MCCE technology has made great progress, but studies on GID detection and treatment by MCCE are in the primary stage. Further studies are required to confirm the performance of MCCE.