Magnetic nanoparticles continue to garner widespread interest in biomedical applications, such as visualization agents in MRI, therapeutic vehicles for drug delivery and heat mediators in hyperthermia. Recent advances in colloidal synthesis and surface-functionalization techniques have greatly contributed to the design of functionalized magnetic nanoparticles with controlled properties and multifunctional capabilities, which are harnessed for dual diagnostic and therapeutic purposes. The surface-functionalization methods in particular have aided in obtaining magnetic nanoparticles coated with molecules, with tailored functionalities that enhance their applications. In this article, the methods of synthesis and functionalization are examined, with emphasis on how these impact their biomedical applications.