There has been unprecedented progress in the development of biomedical nanotechnology and nanomaterials over the past few decades, and nanoparticle-based drug delivery systems (DDSs) have great potential for clinical applications. Among these, magnetic drug delivery systems (MDDSs) based on magnetic nanoparticles (MNPs) are attracting increasing attention owing to their favorable biocompatibility and excellent multifunctional loading capability. MDDSs primarily have a solid core of superparamagnetic maghemite (γ-Fe2O3) or magnetite (Fe3O4) nanoparticles ranging in size from 10 to 100 nm. Their surface can be functionalized by organic and/or inorganic modification. Further conjugation with targeting ligands, drug loading, and MNP assembly can provide complex magnetic delivery systems with improved targeting efficacy and reduced toxicity. Owing to their sensitive response to external magnetic fields, MNPs and their assemblies have been developed as novel smart delivery systems. In this review, we first summarize the basic physicochemical and magnetic properties of desirable MDDSs that fulfill the requirements for specific clinical applications. Secondly, we discuss the surface modifications and functionalization issues that arise when designing elaborate MDDSs for future clinical uses. Finally, we highlight recent progress in the design and fabrication of MNPs, magnetic assemblies, and magnetic microbubbles and liposomes as MDDSs for cancer diagnosis and therapy. Recently, researchers have focused on enhanced targeting efficacy and theranostics by applying step-by-step sequential treatment, and by magnetically modulating dosing regimens, which are the current challenges for clinical applications.