Superparamagnetic iron oxide nanoparticles (SPIONs) are promising materials for various biomedical applications including targeted drug delivery and imaging, hyperthermia, magneto-transfections, gene therapy, stem cell tracking, molecular/cellular tracking, magnetic separation technologies (e.g. rapid DNA sequencing), and detection of liver and lymph node metastases. The most recent applications for SPIONs for early detection of inflammatory, cancer, diabetes and atherosclerosis have also increased their popularity in academia. In order to increase the efficacy of SPIONs in the desired applications, especial surface coating/characteristics are required. The aim of this article is to review the surface properties of magnetic nanoparticles upon synthesis and the surface engineering by different coatings. The biological aspects, cytotoxicity, and health risks are addressed. Special emphasis is given to organic and inorganic-based coatings due to their determinant role in biocompatibility or toxicity of the final particles.