In the rapidly developing areas of nanobiotechnology, magnetic nanoparticles (MNPs) are one type of the most well-established nanomaterials because of their biocompatibility and the potential applications as alternative contrast enhancing agents for magnetic resonance imaging (MRI). While the development of MNPs as alternative contrast agents for MRI application has moved quickly to testing in animal models and clinical trials, other applications of biofunctional MNPs have been explored extensively at the stage of qualitative or conceptual demonstration. In this critical review, we summarize the development of two straightforward applications of biofunctional MNPs--manipulating proteins and manipulating cells--in the last five years or so and hope to provide a relatively comprehensive assessment that may help the future developments. Specifically, we start with the examination of the strategy for the surface functionalization of MNPs because the applications of MNPs essentially depend on the molecular interactions between the functional molecules on the MNPs and the intended biological targets. Then, we discuss the use of MNPs for manipulating proteins since protein interactions are critical for biological functions. Afterwards, we evaluate the development of the use of MNPs to manipulate cells because the response of MNPs to a magnetic field offers a unique way to modulate cellular behavior in a non-contact or "remote" mode (i.e. the magnet exerts force on the cells without direct contact). Finally, we provide a perspective on the future directions and challenges in the development of MNPs for these two applications. By reviewing the examples of the design and applications of biofunctional MNPs, we hope that this article will provide a reference point for the future development of MNPs that address the present challenges and lead to new opportunities in nanomedicine and nanobiotechnology (137 references).