Magnetic nanoparticles are useful as contrast agents for magnetic resonance imaging (MRI). Paramagnetic contrast agents have been used for a long time, but more recently superparamagnetic iron oxide nanoparticles (SPIOs) have been discovered to influence MRI contrast as well. In contrast to paramagnetic contrast agents, SPIOs can be functionalized and size-tailored in order to adapt to various kinds of soft tissues. Although both types of contrast agents have a inducible magnetization, their mechanisms of influence on spin-spin and spin-lattice relaxation of protons are different. A special emphasis on the basic magnetism of nanoparticles and their structures as well as on the principle of nuclear magnetic resonance is made. Examples of different contrast-enhanced magnetic resonance images are given. The potential use of magnetic nanoparticles as diagnostic tracers is explored. Additionally, SPIOs can be used in diagnostic magnetic resonance, since the spin relaxation time of water protons differs, whether magnetic nanoparticles are bound to a target or not.