Magnetic nanoparticles (MNPs) possess unique magnetic properties and the ability to function at the cellular and molecular level of biological interactions making them an attractive platform as contrast agents for magnetic resonance imaging (MRI) and as carriers for drug delivery. Recent advances in nanotechnology have improved the ability to specifically tailor the features and properties of MNPs for these biomedical applications. To better address specific clinical needs, MNPs with higher magnetic moments, non-fouling surfaces, and increased functionalities are now being developed for applications in the detection, diagnosis, and treatment of malignant tumors, cardiovascular disease, and neurological disease. Through the incorporation of highly specific targeting agents and other functional ligands, such as fluorophores and permeation enhancers, the applicability and efficacy of these MNPs have greatly increased. This review provides a background on applications of MNPs as MR imaging contrast agents and as carriers for drug delivery and an overview of the recent developments in this area of research.