Magnetic nanoparticles have been proposed for use as biomedical purposes to a large extent for several years. In recent years, nanotechnology has developed to a stage that makes it possible to produce, characterize and specifically tailor the functional properties of nanoparticles for clinical applications. This has led to various opportunities such as improving the quality of magnetic resonance imaging, hyperthermic treatment for malignant cells, site-specific drug delivery and the manipulation of cell membranes. To this end a variety of iron oxide particles have been synthesized. A common failure in targeted systems is due to the opsonization of the particles on entry into the bloodstream, rendering the particles recognizable by the body's major defence system, the reticulo-endothelial system. This review discusses each of the above bio-applications of such magnetic nanoparticles and details some of the main recent advances in biological research.