In this review we discuss conventional methods of performing biological assays and molecular identification and highlight their advantages and limitations. An alternative approach based on magnetic nanotechnology is then presented. Firstly, magnetic carriers are introduced and their biocompatibility and functionalisation discussed, with spotlights on functionalisation via self assembled monolayers and on methods of reducing nonspecific binding. In addition an introduction is provided to the basic physical concepts behind the various types of sensors used to detect magnetic labels. Finally, progress in the field of magnetic biosensors and the outlook for the future are discussed.