With advancing developments over the use of magnetic nanoparticles in biomedical engineering, and more specifically cell-based therapies, the question of their fate and impact once internalized within (stem) cells remains crucial. After highlighting the regenerative medicine applications based on magnetic nanoparticles, this review documents their potential cytotoxicity and, more importantly, underscores their valuable features for stem cell differentiation. It then focuses on the transformations magnetic nanoparticles might experience in cells, mainly consisting in their progressive degradation, and assesses the practical pitfalls related to this degradation. First, it may result in a loss of long-term theranostic potential, and second, it necessitates an adaptation of the cell metabolism to the released iron. Overall, this review demonstrates that magnetic nanoparticles present undeniable interest for stem cell-based biomedical applications; however, each nanoparticle/cell system must be carefully considered for a safe medical use. It also clearly evidences that the biodegradation of the nanoparticles and the cell response to the released iron must be systematically assessed.